Bharti Airtel, the country's largest mobile-phone operator, posted a 26 per cent growth in its third-quarter net profit after the company added record subscribers and widened its lead over rivals.
Net income rose to Rs 2,160 crore in the three months ended December 31, 2008, from Rs 1,720 crore a year earlier, the company said today. Sales climbed 38 per cent.
Bharti expanded services across rural areas, helping it add 8.17 million users in the quarter, compared with 5.31 million additions for nearest rival Reliance Communications.
Bharti gained 6.2 per cent to close at Rs 619.2 on the Bombay Stock Exchange today, the most in more than two months. The stock was the best performer today.
"Bharti's strategy of extensive rollout ahead of competition, especially in new villages, has yielded rich dividends," Chairman Mittal said in a statement.
Sales in the third quarter rose to Rs 9,630 crore, matching estimates, from Rs 6,960 crore a year earlier. The operator's network covered more than 400,000 villages across the country at the end of December, according to the statement.
Average revenue per user fell to Rs 324 in the third quarter from Rs 331 in the previous three months, Bharti said. The operator is "on track" to spend Rs 17, 500 crore this year on adding networks and plans to invest a similar amount in the financial year starting April, Chief Executive Officer Manoj Kohli told reporters.
“There were a lot of minutes in the system that were irrationally priced or free minutes of usage. Therefore this decline is a sign of correction,” said Sanjay Kapoor, President, Mobile Division, Bharti Airtel. Responding to competitive tariff offerings by competitors, Kapoor said, any such short-term strategy will destabilise the market. No one can sustain such offerings on a long term basis.
However the impact of competition Is getting fiercer as new players get into the market. Bharti's market share of net new additions in the quarter fell from 28.5 per cent in the second quarter to 25.9 per cent in this quarter. It's EBIDTA margins have also remained flat at 41 per cent which is comparable to the previous quarter.
The total number of employees in the company witnessed a decline for the second quarter in a row. The consolidated employee head count fell from 25,616 to 25,553 this quarter.
Akhil Gupta, Deputy Group CEO and Managing Director of Bharti Enterprises, said the reduction in employee headcount is a part of managing our costs better. To provide affordability to our customers, cost management is very important.
The company continued to enjoy a free cash flow, which it attained last quarter which will help the company finance its investment in the upcoming 3G auctions through internal accruals. Kohli said, “our internal accruals are very strong, so we can fund our 3G investments on our own and if need be we can raise a little debt.” The debt-equity ratio of the company at present stands at 0. 23. During the quarter Bharti Airtel also received additional spectrum in nine circles and is expected to received more spectrum in eight states.
As on December 2008, 50 per cent of the Rs 4338.1 crore invested were made in mobile services. Harit Shah, telecom analyst, Angel Broking, said the results were in line with market expectations. The global slowdown had its impact on the corporate business and long-distance call business. The minutes of usage also fell due to the free calls in the market.
