Bharti reports 41% drop in profit, but stock surges

Bharti Airtel Ltd, India’s biggest mobile phone operator, rose the most in three weeks in Mumbai trading after earnings beat some analysts’ estimates. The stock gained 1.8%, the most since January 12, to Rs322.80 at close of trading in Mumbai after slumping as much as 4.1% earlier.

The benchmark Sensex gained 0.4%, its first advance in six days.
Excluding Rs490 crore in one-time items, profit beat projections, said Ganesh Ram, an analyst at Kim Eng Securities India.

A one-time branding cost of Rs340 crore and a foreign exchange loss of Rs150 crore eroded earnings, the company, part-owned by Singapore Telecommunications Ltd, said in a statement.

At Rs1,303 crore, though, the company’s net profit was down 41% year on year and well below the Rs1,610 crore consensus estimate of 24 analysts polled by Bloomberg.

The 14% rise in revenue in India and South Asia mobile phone business, coupled with diminishing prospects of call-tariff cuts are easing concerns about phone companies’ earnings in the world’s second-largest wireless market, said Ram.

“The sector has become more and more attractive,” Ram said. He has a “buy” rating on the company. “Bharti is seeing top-line driven growth. In India, there has been no significant decline in tariffs, plus the company saw a very good subscriber addition.”

Sales rose 53% to Rs15,756 crore as the carrier added Rs4,050 crore in revenue from Africa after its acquisition of Kuwait’s Mobile Telecommunications Co’s assets there last year.

That compared with the Rs15,800 crore average of 35 analyst estimates.

Earnings before interest, tax, depreciation and amortisation, or Ebitda, rose 22% to Rs4,980 crore from Rs4080 crore a year earlier, according to Bharti’s quarterly statement.

“Top line revenue growth reflects solidly in India and Africa,” Manik Jhangiani, chief financial officer of Bharti Group, told reporters at a news conference. “The regions will provide the twin engines of growth for Bharti.”

Bharti said it had 207.8 million subscribers across all its markets as of December 31.

To counter higher competition and slowing growth in India, Manoj Kohli, chief executive officer of Bharti’s Africa business, plans to expand businesses in Nigeria, Gabon, Zambia, Malawi, Niger and Uganda after the company completed its $10.7 billion cash and debt purchase of the African assets of Zain. 

Japan’s NTT DoCoMo Inc and Norway’s Telenor ASA set off a tariff war when they entered India in 2009 luring users with cheap tariffs in a market that is forecast by researcher Gartner Inc to exceed 993 million users by the end of 2014.

India had 730 million mobile-phone accounts in November, according to the nation’s telecom regulator, lagging behind only China. Call rates in India have fallen to half-penny a minute.

Mobile number portability, which operators were required to provide to customers across India from last month, may benefit Bharti, said chief executive officer Sanjay Kapoor in a call with analysts.

“We are well positioned to leverage from the opportunity based on our wide network presence,” he said.

Bharti had 207.8 million subscribers across 19 countries as of December 31, according to the statement.

The operator’s average revenue per user, a key metric of performance in the telecommunications industry, plunged 14% in India to Rs198 a month, from Rs230 a year earlier. The average revenue per user for Bharti’s Africa operations was $7.30 a month compared with $7.40 in the previous quarter.
Bharti started offering third-generation wireless services in southern Indian cities this year. The company paid the government Rs12,300 crore for 3G wireless permits in 13 of India’s 22 telecommunication zones last year, and another Rs3,300 crore for licences to offer broadband wireless service in four regions.
The company’s net debt was Rs59,900 crore as of December 31, up from Rs4,770 crore the previous year, Bharti said in its statement.