Bharti Airtel’s third-quarter profit was hit by high interest and amortization costs related to the mobile network operator’s 3G rollout in India and its acquisition in Africa.
Revenue for the quarter was about 173 billion rupees (US$3.5 billion), up 13 percent from the same quarter last year.But net profit was down 38 percent to 10.3 billion rupees.
The company said that the appreciation of the U.S. dollar against the rupee and several African currencies had also impacted profits.Bharti Airtel is in an investment phase, and it is expected that it will place a drag on profits for some time, said Kamlesh Bhatia, a principal research analyst at Gartner. The positive side is that in its key market, India, there is some stability emerging on the tariff front, he added.
Bharti Airtel acquired its African operations from Zain in a $10.7 billion deal in June last year. Acquisitions in Africa, Bangladesh and Sri Lanka, which are expected to bring economies of scale to the company’s operations, were also part of the company’s bid to emerge as a multinational mobile operator.
Besides expanding overseas, the company also paid 156 billion rupees for 3G and broadband wireless licenses and spectrum in India. The company’s net debt at the end of the quarter was 644 billion rupees.
The operator had 227 million mobile subscribers across 19 countries at the end of September, up 21 percent from the same quarter last year. More than 178 million of these subscribers came from India, Sri Lanka and Bangladesh, which the company describes as its South Asian operation, with 173 million of these in India. The company had 48 million subscribers in Africa at the end of the quarter.
Its revenue from India, Sri Lanka, and Bangladesh grew by 11.7 percent to 127 billion rupees in the quarter, but growth from the 16 countries in Africa was higher, at 23 percent, although from a smaller base. Its revenue from Africa was about $1 billion.
India’s mobile services market went through a period of cut-throat competition and price cuts, as newer operators tried to gain market share. The new operators are no longer as aggressive, as some of them got embroiled in investigations into an alleged scam in the allotment of 2G licenses, and they are also focusing investments more on meeting service rollout obligations than on aggressive marketing and pricing.
Airtel and some other large operators recently increased tariffs as the industry enters a phase of stability, which should start reflecting in their revenue soon, Bhatia said.
The growth in subscribers in India is also reaching a plateau, and the larger operators like Bharti Airtel are now less concerned about hunting for new customers, and focusing more on getting more revenue through new services, Bhatia said. Mobile broadband for example is a new opportunity for these operators, he added.For now, however, Bharti Airtel still has to deal with falling average revenue per user (ARPU), and a reduction in the number of minutes people use their phones.