Improved prospects in Africa and the launch of 3G services in India have brightened the outlook for Bharti Airtel after currency losses led to a bigger than forecast drop in quarterly profit.
India's wireless market -- the world's second biggest and the fastest growing -- saw steady prices last year following cut rate competition, which sent prices tumbling in late 2009, as firms including Vodafone and Reliance Communications wrestled for market share.
Shares in India's top mobile carrier, valued at about $26 billion, survived an early fall of 3.3% and were up 2.5% by 0605 GMT, as analysts said the company's earnings outlook had improved with the launch of 3G services in India.
"My sense is on a three year horizon, this company should be hugely profitable because that's the time it requires to rejig its costs," said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services. "If the company is able to get such substantial revenue growth, it shows the company has been able to manage the consolidation. Now, cost management is a much simpler problem."
Bharti, 32.2% owned by Southeast Asia's top telecom firm SingTel, aims to launch 3G wireless services across all its 13 telecoms zones in India by March and expects the premium offering to help stabilise its Average Revenue Per User (ARPU).
Bharti said on Wednesday, that consolidated net profit fell 41% to Rs 13.03 billion ($286 million) for its third quarter ended December, from Rs 21.95 billion an year ago, based on international accounting standards.
Revenue rose 53% to Rs 157.56 billion from Rs 103.05 billion a year ago.
A Reuters poll had expected net profit to fall 26% to Rs 16.25 billion on revenue of Rs 155.40 billion for the firm that operates in 19 countries across Asia and Africa with 199.6 million mobile customers.
But Africa remains a short term worry for Bharti, where it acquired the loss making telecom operations of Zain in 15 countries in a $9 billion deal in June to become the world's fifth biggest wireless carrier.
"Our objective is to make the operations very profitable, revenue growth has picked up well," said Manoj Kohli, Bharti Airtel's CEO for international operations, referring to the company's Africa operations.
Launch Of 3G Services
Bharti, which spent $2.7 billion last year to buy 3G radio airwaves in an auction, recently launched the services in southern Karnataka. The company hopes to cover 40 cities by March and expand the services to 1,500 cities and towns anyear later.
Third generation services facilitate faster internet on mobile phones and let customers use services such as video calls. The services are expected to boost mobile carriers' data revenue in a market where low margin voice calls account for close to 90% of the total revenue.
Bharti's monthly ARPU in India in the December quarter fell 14% from a year ago. ARPU in Africa dropped to $7.3 in the quarter from $7.4 in the quarter ended in September 2010.
The company said it repaid debt of $415 million taken for the rollout of third generation mobile services in the December quarter, and incurred a one time brand promotion cost of Rs 3.40 billion ($75 million).