Bharti Quarterly Profit Misses Estimates on Higher Costs

Bharti Airtel Ltd., India’s largest mobile-phone operator, posted profit that missed analyst estimates after a weaker rupee raised interest payments and prices for network equipment.

Net income fell 49 percent to 5.09 billion rupees ($94 million) in the quarter ended March, New Delhi-based Bharti said today in a statement. That missed the 7.6 billion-rupee median of 27 analysts’ estimates compiled by Bloomberg.

Billionaire Chairman Sunil Mittal is trying to contain costs as Bharti prepares for license renewals and regulatory changes. The company has increased call rates to cover some costs by removing discounts on tariff plans, Chief Financial Officer Sarvjit Singh Dhillon told investors on Feb. 1.

“One thing Bharti investors can’t afford is the company’s expenses mounting,” Harit Shah, a Mumbai-based analyst with Nirmal Bang Equities Ltd., said before the results were announced. “There are more than a few regulatory fees on the horizon and with voice tariffs not increasing substantially, those fees will take their toll.”

Revenue rose 9.2 percent to 204.5 billion rupees, lagging behind the median estimate of 208 billion rupees.

Bharti shares fell 0.6 percent to 316.75 rupees at the close of Mumbai trading. The benchmark S&P BSE Sensex rose 1.2 percent.

‘Pricing Power’

Earnings before interest, tax, depreciation and amortization, or Ebitda, margin was 31.7 percent in the quarter, Bharti said, compared with 33.3 percent a year earlier.

The company’s network operating costs increased 18 percent to 49.1 million rupees. Employee costs rose 24 percent to 10.8 billion rupees, Bharti said.

Net finance costs increased to 12.1 billion rupees from 10.6 billion rupees as year earlier, Bharti said. The rupee declined more than 6 percent against the dollar in the 12 months ended March, according to data compiled by Bloomberg.

Bharti will benefit from any reduction in interest rates, said Kishor Ostwal, managing director of CNI Research Ltd.

“In the next quarter or the quarter after that, costs will be under control and margins will improve,” Ostwal said. “The demand is picking up.”

The number of mobile-phone users in India and South Asia increased to 196.1 million at the end of March from 189.4 million at the end of December, the company said. Subscribers in Africa rose to 63.7 million from 61.7 million.

“Pricing power is slowly returning” as competitive intensity in the industry eases, Bharti’s Dhillon said in a press conference in New Delhi today.

The company plans capital spending of as much as $2.3 billion in the year started April 1, not including potential spending to acquire spectrum, he said.

Bharti has agreed to acquire 30 percent more of unit Airtel Bangladesh Ltd. from the Warid Group, it said today in a separate statement, without providing a value for the deal. The transaction will give the Indian operator full control of the company in which it had bought 70 percent stake in 2010.

Before it's here, it's on the Bloomberg Terminal.