SingTel – BT

Bharti confident of turning around in Africa

BHARTI Airtel is confident of growing its high-speed mobile data business and turning around its struggling African operations after the Indian mobile market leader reported a bigger-than-expected fall in fiscal second-quarter profit that was its seventh consecutive quarterly profit drop.

Bharti yesterday said that net profit for the three months ended September fell 38 per cent, hit by higher interest costs, foreign exchange losses and its money-losing African operations.

The poster boy of India’s telecoms sector last year ventured into Africa by acquiring most of the mobile operations of Kuwait’s Zain in a US$9 billion deal, becoming the world’s fifth-biggest mobile carrier by subscribers.

But high costs have weighed down the firm which has yet to turn a profit there.

In India, the outlook for Bharti and its rivals have improved after they raised voice call prices by about a fifth, the first such increase in at least two years, after a vicious price war in the 15-player market squeezed profits.

The government has said that it would ease rules for telecoms mergers and acquisitions to facilitate consolidation in the crowded sector, a move seen as positive for companies such as Bharti, who were hit by stiff competition from new entrants after India issued more telecoms licences in 2008.

‘We have turned slightly overweight on the sector,’ said Sudhakar Shanbhag, chief investment officer at Kotak Mahindra Old Mutual Life Insurance, which holds telecoms stocks in its portfolio of US$1.8 billion. ‘The trigger has been that telecoms companies are getting back the pricing power and there is some element of consolidation.’

Bharti shares, valued at more than US$30 billion, were up more than 0.7 per cent by 0824 GMT after falling initially after the results were announced. The stock is up 10 per cent this year, outperforming a nearly 14 per cent fall in the broader market .

Bharti was founded by Sunil Mittal, who started his career selling bicycle parts and saw an opportunity in telecoms when India was opening the sector to private participation in the mid-1990s. Mr Mittal is India’s sixth-richest man currently, according to Forbes magazine.

Carriers in India, the world’s second-biggest mobile phone market with about 870 million users, are also betting on premium data services to boost margins after they launched third-generation (3G) networks earlier this year, although the initial uptake has been slower than expected.

Bharti has seven million 3G customers in India, with a quarter of them using the services regularly. — Reuters

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