India's top mobile phone company, Bharti Airtel, reported Wednesday a surprise 37 percent plunge in quarterly profits due to "hyper-competition", sending its shares to a two-year low.
Indian mobile firms have been battling aggressively for a share of the world's second-largest cellular market after China, driving call rates down to below a cent a minute -- the cheapest globally -- and hurting bottom lines.
Bharti's net profit for the first financial quarter to June dived to 7.62 billion rupees ($138 million) from 12.15 billion rupees in the same period a year earlier -- the company's 10th straight quarterly fall.
"Revenues in India have been depressed due to hyper-competition," Bharti's billionaire chairman Sunil Bharti Mittal said.
The announcement sent Bharti's shares down 6.6 percent to 274.40 rupees, their lowest in two years.
The performance sharply undershot market forecasts of a 12-billion-rupee profit for the quarter.
"Earnings certainly were below expectation. Profitability will remain under pressure," Motilal Oswal Securities' markets vice president Rikesh Parikh told AFP.
Operating costs climbed by 21 percent to 92 billion rupees while revenues rose by 14 percent to 193.5 billion rupees.
India's has nine cellular operators, making it tough to hike tariffs.
"We were cognisant of the effect it (competing aggressively) could have on our bottom line but we made it very clear in the short run we would make a choice in favour of market share," Bharti Airtel chief executive Sanjay Kapoor said.
The earnings came amid turmoil in India's telecom market after the Supreme Court this year cancelled 122 second-generation (2G) mobile licences issued in 2008, on the grounds the distribution process was under-priced and corrupt.
The government aims to re-auction the airwaves in November, setting a reserve price of $2.5 billion, around nine times the 2008 sale price.
The industry argues the price threatens its viability and jeopardises India's goal of rolling out mobile network across rural areas.
Major operators Bharti and Britain's Vodafone were not hit by the court ruling but they want to buy more spectrum to ease the load on their overburdened networks.
Other players affected by the judgement say they may exit the market entirely because repurchasing their licences will be too costly.
The developments have created uncertainty about the future of India's mobile market, which had been seen as one of the nation's biggest liberalisation success stories and a promoter of economic development.
Also weighing on Bharti's earnings were interest costs from the $12.1 billion debt it acquired in purchasing faster 3G spectrum two years ago and the African mobile operations of Kuwait's Zain.
African revenues grew by 31.5 percent but losses from the division more than doubled to 6.69 billion rupees.
Bharti's subscriber base across India, South Asia and Africa totalled 260.71 million.
Separately Bharti said it was mulling an Initial Public Offer (IPO) of its telecom tower unit, Bharti Infratel, in which it would sell up to a 10 percent stake in the venture which has 33,000 towers.
Source: http://news.yahoo.com/indias-bharti-airtel-profit-dives-surprise-37-072351693.html
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