Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

India's Bharti Airtel hit by mobile tariff war

John Ribeiro | Jan. 25, 2010
Revenue and profit growth flat in quarter to Dec. 31

BANGALORE, 22 JANUARY 2010 - India's largest mobile operator, Bharti Airtel, reported on Friday flat growth in revenue and net profit for the quarter ended Dec. 31, even as its mobile customer base increased 40 per cent from a year earlier.

Bharti and other Indian mobile operators have been affected by a tariff war in the market which has pushed voice rates to below 0.01 rupees (US$0.0002) per second. Voice calls were earlier typically charged by the minute.

Idea Cellular, another large mobile services provider, said on Thursday that its "average realized rate per minute" dropped by 9 percent between the third and fourth quarters of last year, because of the tariff war.

Bharti reported that revenue grew by 1 per cent to 97.72 billion rupees, by U.S. accounting rules, while net profit was up 2 per cent to 22 billion rupees from the same quarter in the previous year.

Mobile operators are going to be under pressure in the short term, said Kamlesh Bhatia, a principal research analyst at Gartner. There are currently too many operators in the market, and consolidation is bound to happen soon with some operators getting acquired, he added.

Operators also have to start focusing on text-based value-added services (VAS), such as targeted advertising and location-based services, Bhatia said. Internet based services address only the small, high-end segment of the market, while text on mobile phones is very popular with many Indian mobile users, he added.

Indian operators have not made a significant impact yet with VAS other than short-message service (SMS). VAS accounted for 11 percent of Bharti's mobile revenue in the quarter to Dec. 31, up from 9.5 per cent a year earlier. Most of the VAS revenue came from SMS.

The Indian urban market is already saturated, and new gains in subscribers will have to come from rural markets where revenue per user and margins tend to be lower, according to Bhatia.

Bharti had about 119 million subscribers in India at the end of the quarter, with another 1 million subscribers in Sri Lanka where it set up operations last year. The company announced this month plans to acquire a majority stake in Warid Telecom, the fourth-largest operator in Bangladesh.

The expansion into new markets like Sri Lanka and Bangladesh will help Bharti spread its costs across more markets than India, Bhatia said. There are opportunities in these markets to address new subscribers who currently don't have mobile phones, he added.

The slide in Bharti's revenue and profit growth started in the quarter ended Sept. 30, when it reported that its revenue grew by 9 percent, while net profit grew by 13 per cent. Revenue had grown by 17 per cent and net profit by 24 per cent in the previous quarter.

 

1  2  Next Page 

Sign up for CIO Asia eNewsletters.