-- January-March net profit drops 28% to INR10.06 billion vs INR12.44 billion forecast
-- Sales rise 15% to INR187.29 billion vs INR189.13 billion forecast
-- India mobile call traffic up 5.1% on quarter
-- Average revenue per minute falls 1.8% on quarter
-- Adds 5.6 million mobile users in India
(Adds closing stock price in 8th paragraph, comments from analyst in 9th paragraph)
By R. Jai Krishna and Dhanya Ann Thoppil
Bharti Airtel Ltd. (532454.BY) Wednesday posted a sharper-than-expected 28% drop in quarterly profit, weighed by higher interest and tax costs, though a surge in telephone call traffic and strong user additions in India cheered investors.
The strong operational performance at India's top telephone company by number of customers comes barely a week after robust numbers from Idea Cellular Ltd., improving investor confidence in a sector marred by graft allegations, regulatory uncertainty and stiff competition.
"The recent regulatory developments in India will have significant implications on the future of telephony and broadband, as well as India's global competitiveness," Chairman Sunil Mittal said in a statement.
India's telecom industry has been mired in uncertainty over a policy to frame spectrum auction and pricing rules. Industry players and analysts have panned the sector regulator's recent proposals, including ones which suggest charging a much higher price than current rates for bandwidth, saying the recommendations--if accepted--will erode profitability at mobile-phone companies.
Bharti's net profit fell from a year earlier for the ninth straight quarter in January-March to INR10.06 billion ($200 million), though revenue rose nearly 15% to INR187.29 billion. The numbers are based on international accounting standards.
The average of estimates in a Dow Jones Newswires poll of 12 analysts was for a net profit of INR12.44 billion on revenue of INR189.13 billion.
Investors, however, found comfort in strong sequential growth in Bharti's key operational parameters in India. The company's average revenue per user rose 1.1%, while call traffic increased 5.1%. It added 5.6 million users in the fourth quarter through March, compared with 2.9 million in the previous three months.
Wednesday, Bharti's shares rose as much as 3.1% before paring gains to close up 2.5% at INR317.95 in a flat Mumbai market.
"Bharti's strategy on customer acquisition has started to play in its favour," Barclays Capital said. The improving subscriber additions could turn the overall revenue growth dynamics back in its favour, it added.
Telephone call usage in India surged after a long spell of muted growth, as the company aggressively offered free talk time to customers, in the face of competition. The discounts, however, dragged Bharti's average revenue per minute 1.8% down at INR0.44.
Bharti, about 32%-owned by Singapore Telecommunications Ltd., operates in India, Bangladesh, Sri Lanka and several African nations. Its losses in Africa narrowed from a year earlier to INR3.41 billion, though average revenue and minutes of usage per customer declined sequentially.
Interest on debt taken on to fund the acquisition to enter Africa in 2010 and to pay for third-generation bandwidth in India pushed finance costs up 55% in the past quarter. Tax expenses jumped 24% to INR7.09 billion.
-By Dhanya Ann Thoppil, Dow Jones Newswires; +91-9886929464; firstname.lastname@example.org