Bharti Airtel, India's top mobile company, reported on February 01, its net quarterly profit plunged by an unexpected 72 percent, hit by punishing price competition and a surge in interest charges.
The profit drop to 2.84 billion rupees in the three months to December marked the telecom giant's 12th straight quarterly fall and far undershot analysts' forecasts of an eight-billion-rupee profit.
"Market conditions have been challenging in recent quarters due to pricing pressures and rising input costs," Bharti's billionaire founder and chairman Sunil Bharti Mittal said. These have "put enormous pressure on the sector and consequently margins" he added.
Bharti, which has 262 million clients globally and is the world's fourth-largest mobile operator by customers, posted a profit of 10.1 billion rupees in the same quarter last year. "There are still big headwinds, it's not clear sailing yet by any means," said Harit Shah, an analyst with Mumbai-based Nirmal Bang Institutional Equities, who has a "sell" recommendation on Bharti shares.
Bharti's shares slid by nearly four percent before recovering to trade down nearly two percent at 333.05 rupees at mid-afternoon. The telecom sector was once a market star but price wars which have pushed call rates to among the world's lowest have taken off the shine.
Even though the number of major telecom companies has fallen to seven from over a dozen, due to a Supreme Court ruling scrapping licences of some smallar firms, rivalry remains intense.
Weighing on earnings were interest costs which soared 69 percent from a year earlier due to debt from purchasing faster 3G spectrum and the African mobile operations of Kuwait's Zain in 2010. Bharti's Africa operations, which it bought for $10.6 billion to extend its global footprint and "serve as a shining example" of co-operation between South Asia and Africa, are still losing money.
The group must also pay nearly $1 billion to cover government demands for operators to pay surcharges on their airwaves and has to purchase additional broadband in a March auction to meet growing demand.
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