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| Edited By: |Source: Reuters |Updated: Mar 16, 2018, 06:20 AM IST
Bharti Airtel, India's top mobile operator, gave a downbeat outlook due to a nasty price war after posting its slowest pace of profit growth in at least six years, sending its shares down nearly 7%.
Bharti, whose tie-up talks with South Africa's MTN collapsed last month for a second time, denying it access to vast new markets and revenue streams, is facing tremendous competition at home.
Four new firms, including ventures of Telenor and Etisalat, are set to start operations this year and existing firms are scrambling to sign up users before then by drastically dropping call charges.
"There is clearly more pain left in the sector as competitive pressure is expected to intensify in the months ahead," said RK Gupta, managing director of Taurus Mutual Fund, which holds Bharti stock.
"Margins of these mobile companies will remain under pressure for some time. I don't think anyone should think of taking fresh exposure in telecom stocks at this point in time."
Shares in Bharti, India's seventh-most valuable firm with a market value of about $25 billion, fell as much as 6.9% to its lowest in seven months.
By 0800 GMT, the stock was down 5.4% at Rs295.10 in a firm Mumbai market, with 4.7 million shares changing hands, more than two-and-a-half times the 90-day average.
Bharti, which has more than 23% of India's 470 million-plus mobile subscribers, will be forced to match rivals' prices to retain its market share, but any such move would mean sacrificing revenue and earnings growth, analysts say.
A new per-second billing plan from sixth-ranked Tata Teleservices helped it add more users than Bharti in the September quarter, and a move by second-ranked Reliance Communications to cut all call charges to 50 paise (US 1 cent) a minute is seen shaking up the sector.
"With this competitive intensity and irrational pricing in some pockets, it is possible in the short-term we could see some impact on the growth," said Akhil Gupta, deputy group CEO at the mobile firm's parent Bharti Enterprises.
"We will be competitive, (but) there is no reason why we should match always the lowest common denominator," he said.
Bharti, which failed to seal a $24 billion tie-up with MTN that could have led to a full merger, said it would continue to look at overseas expansion opportunities but was not desperate for a deal.
The mobile firm would look at buying a stake in Zain Telecom if there is an opportunity, said Akhil Gupta, who is also a director of Bharti Airtel, in response to a question whether Bharti was interested in the Kuwaiti operator.
"But there is nothing on the horizon now," he said.
New Delhi-based Bharti, in which Southeast Asia's top phone firm SingTel owns more than 30 percent, said July-September net profit rose to Rs23.21 billion ($495 million) under US accounting rules from 20.46 billion rupees a year ago. Profit fell 8% quarter-on-quarter.
Revenue rose 9% to Rs98.46 billion from 90.20 billion reported a year earlier.
A Reuters poll of 11 brokerages had forecast net profit of Rs24.41 billion on revenue of 103.55 billion for Bharti, which added 8.1 million mobile users in the quarter to reach a total of 110.5 million at end-September, 43% higher from the year-ago quarter.
Average revenue per user fell 24% to 252 rupees in the September quarter from a year earlier, as more than half of Bharti's new users came from rural areas, where customers tend to spend less than in urban areas.
Average minutes of usage fell an annual 15% to 450 minutes.
EBITDA (earnings before interest, taxes, depreciation and amortisation) margin, a key gauge of profitability, was at 42.1%, compared with 41 in the year-ago quarter.
Bharti shares have lost nearly a quarter in October, while second-ranked Reliance Communications is down by almost a third in the face of the price war. The broader market is down 6 percent in October.
