Rising costs drag down Bharti Airtel profit

Mail Today Bureau   New Delhi     Last Updated: February 2, 2013  | 11:35 IST

Billionaire Sunil Mittal controlled Bharti Airtel Ltd recorded a drop in profit for the twelfth successive quarter as higher costs eroded the telco's bottomline offsetting the 9.5 per cent increase in revenue during the third quarter ended Decemebr 31.

The consolidated net profit of company plummeted by 72 per cent to Rs 284 crore for the quarter from Rs 1,011 crore in the same period last year. Revenue rose to Rs 20,240 crore, but the company was hit by higher financing costs on the huge debt burden, foreign exchange losses and higher taxes.

"Market conditions have been challenging in recent quarters due to pricing pressures and rising input costs, which have put enormous pressure on the sector and consequently the margins," chairman Sunil Mittal said in a statement.

"However, the worst seems to be getting over, with corrections taking place in customer acquisition practices and the tariffs", he said. Fierce competition in has prevented Indian telecos from increasing prices in recent years.

The outlook for bigger firms including Bharti Airtel has improved since an early 2012 court order to revoke permits of several operators, signalling the exit of some smaller companies from the market.

Market leader Bharti Airtel and Idea Cellular , India's No. 3 mobile carrier by revenue, recently raised call prices by withdrawing discounts. This week Idea reported a smaller-thanexpected increase in quarterly profit as higher network operating costs ate into margins.

The government wants established operators to pay surcharges on their airwaves, By Mail Today Bureau in New Delhi which will mean a bill of almost Rs 5,210 crore for Bharti, the country's No.1 operator by both revenue and number of subscribers, which also needs to buy new spectrum in an auction due in March. In 2010, it ventured into 15 African countries, buying mobile assets there for $9 billion.

The net loss from African operations has widened to Rs 520 crore in October-December 2012 quarter from Rs 260 crore in the same period a year ago. "The market in Africa is softer than we expected originally... the market at that time was growing at about 13 per cent and in the last year or two, the market is actually growing in single digits of about 8-9 per cent," Bharti Airtel CEO (International) and joint MD Manoj Kohli told reporters here.

Finance costs for Bharti Airtel rose 69 per cent during the December quarter to Rs 1,332 crore from a year earlier, and income tax expense rose 20 per cent. The net debt of the company stood at Rs 64,282.5 crore as on December 31, 2012.

The company also recorded a forex loss of Rs 248 crore compared with a gain of Rs 13.2 crore a year earlier.

Courtesy: Mail Today 

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