News From Telecom World

Bharti Airtel Q2 net profit rises 27%

Posted on: November 2, 2008

India’s biggest mobile operator sees declining arpu as it scrambles to hoover up users before new rivals move in.

Bharti Airtel Ltd. said Friday its fiscal second-quarter net profit rose 27% from a year earlier, boosted by record subscriber additions, but key operational parameters such as the average revenue per user and minutes of usage declined sequentially.

The drop in the average revenue per user reflects the increasing pressure on India’s largest mobile phone operator by subscribers to add more users before new rivals, who have already received licenses, begin operations in a market that is adding over 8 million users a month.

Bharti’s average revenue per user has fallen quarter-on-quarter over the last two years and the trend is likely is likely to continue as the company moves into lower income generating towns and villages, and offers lower tariffs to attract new users in India’s fiercely competitive mobile phone market.

For the quarter ended Sept. 30, Bharti Airtel said net profit rose to INR20.46 billion from INR16.14 billion a year earlier. Net profit rose a marginal 1% from the quarter ended June 30.

The average forecast of 11 analysts polled by Dow Jones Newswires was for net profit of INR21.32 billion on revenue of INR90.50 billion. Net profit rose a marginal 1% from the first quarter ended June 30.

Net profit was hurt by foreign exchange losses of INR5.86 billion in the just-ended quarter, while being helped by a deferred tax write-back of INR3.01 billion.

“It’s basically the net payout on borrowings that has increased due to the rupee’s depreciation,” Akhil Gupta, managing director at Bharti Enterprises, the holding company of Bharti Airtel, said. The rupee fell 8.4% against the dollar during the quarter.

Total revenue climbed 42% from a year earlier to INR90.20 billion from INR63.37 billion after Bharti added 8.1 million mobile customers, its highest ever for any quarter to date.

The numbers are based on U.S. accounting standards.

“The results are not bad. The forex loss is notional and doesn’t impact the cash flows of the company,” Harit Shah, an analyst at Mumbai-based Angel Broking, said.

“Customer growth is no longer dependent on a few towns or cities, growth is coming from everywhere,” Gupta said.

Bharti’s total user base rose to 79.9 million at the end of September, giving it a wireless market share of 24.6% compared with 23.4% a year earlier.

India is the world’s fastest growing telecom market and the world’s second largest market, after China.

“It (the Indian telecom sector) will continue to grow on a sustainable basis as we believe disposable incomes will continue to come to telecom and entertainment,” Manoj Kohli, chief executive and joint managing director, said at a news conference.

Still, Bharti’s average revenue per user, a key gauge of profitability, slipped 4.3% to INR335 from INR350 in the April-June quarter. The average revenue per user fell from INR366 a year earlier.

The average minutes of usage in the quarter also decreased to 526 from 534 in the first quarter, as the second quarter is the leanest season due to the monsoons, Sanjay Kapur, president of mobile services, said. Minutes of usage, however, increased from 469 a year earlier.

“This (fall) was expected, but minutes of usage has fallen lesser than we expected,” Shah said.

Shares in the company rose 3.7% to INR637.55 at 0638 GMT on the Bombay Stock Exchange. The key 30-share BSE Sensex was up 7.6% at 9,734.13.

Quarterly earnings before interest, tax, depreciation & amortization rose 37% from a year earlier to INR36.99 billion.

But the Ebitda margin slipped to 41% from 41.5% in the previous quarter, and from 42.8% a year earlier.

Source: Total Telecom

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