Bharti Airtel profit beats forecast, still seeks buys

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Thu, Jul 24 04:21 PM

By Devidutta Tripathy

NEW DELHI (Reuters) - Bharti Airtel Ltd, the top mobile operator in the world's fastest-growing wireless market, posted a forecast-beating 34 percent jump in profit and said it would still hunt for targets to expand globally.

Bharti, which in May called off tie-up talks with South Africa's MTN Group that would have created a top-10 global telecom firm, added 7.5 million mobile subscribers in the June quarter to cement its market-leading position.

"There is nothing on the horizon that will significantly erode profit in the near future," Bharti Joint Managing Director Akhil Gupta told reporters on Thursday.

"Surely tariffs are under pressure, will always be under pressure. But I think we are holding up very well."

Gupta said Bharti remained keen to expand overseas, despite the failure of talks with MTN.

"There are many countries, especially the emerging markets, where our low-cost model can be replicated. If we see any opportunity, we will certainly evaluate."

New Delhi-based Bharti, owned about 30 percent by Southeast Asia's top phone firm, SingTel, said consolidated net profit rose to 20.25 billion rupees ($484 million) in its fiscal first quarter ended June, from 15.1 billion a year earlier.

Revenue rose 44 percent to 84.83 billion rupees from 59.05 billion. Analysts polled by Reuters had forecast net profit of 19.34 billion rupees on revenue of 84.06 billion.

India's mobile user base rose 25 times between 2002 and 2007, and research firm Gartner expects it to touch 737 million by 2012 from about 280 million at end-May.

Call rates of as low as U.S. 1 cent a minute, handsets starting from $15, and network expansion by operators have fuelled the pace of growth in India's mobile subscriber base, which is increasing by more than 8 million a month.

"The strong momentum in subscriber additions will continue till we reach 40-45 percent level of penetration," said Harit Shah, analyst at Angel Broking, who rates the stock a "buy".

"Bharti will continue to maintain a 24-25 percent market share. New players will come, but it won't be that easy to challenge Bharti."

Shares in Bharti, which has a market value of about $36 billion, rose as much as 5.5 percent after the results, but later surrendered the gains to end down 2.2 percent in a market that fell 1.1 percent. The stock rose 5 percent on Wednesday.

The bulk of the new mobile users are seen coming from the rural areas where only 10 percent of the population has a phone, compared with a national average of about 25 percent, although they may not be as lucrative as city-based customers.

Bharti's average revenue per user fell 10 percent to 350 rupees from 390 rupees a year earlier, even though minutes of usage rose 12 percent to 534 minutes a month.

Analysts have said the emergence of new operators in the Indian market could put further pressure on tariffs and a move to allow number portability between operators were risks for established players such as Bharti.

Bharti's EBITDA, a key gauge of performance, was stable at 41.5 percent during the quarter, Chief Financial Officer Sarvjit Dhillon said.

He also said capital expenditure plans of $3.5 billion, including Bharti's mobile tower unit, for the fiscal year ending March were on track.

MTN TALKS

After Bharti called off talks with MTN in late May, its main Indian rival, Reliance Communications, opened talks with the South African firm, but also failed to clinch a deal.

Media reports have said MTN might revive talks with Bharti. The initial talks failed as Bharti would not accept a structure that would have made it a subsidiary of MTN.

Bharti's Gupta maintained the company's stand it was not in favour of giving control to anyone, but declined to comment on whether the firms were looking at each other again.

"I am absolutely clear, anything we say on MTN could be misinterpreted and I don't want to further fuel speculation."

Last week while its talks with Reliance Communications were ongoing, MTN denied it had approached Bharti.

Bharti's shares fell 12.6 percent between April and June, in line with a 14 percent drop in the main index, and also on market concerns a deal with MTN could stretch its balance sheet.

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