Bharti, Reliance may post profit slumps

Melissa Chua
05 May 2011
00:00
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Daily News

Major Indian operators Bharti Airtel, Reliance Communications and Idea Cellular are expected to report lower Q1 profits on the back of higher expenses and shrinking ARPU.

Analysts the Economic Times spoke to said 3G launch expenditure, number portability rollout and lower tariffs would affect the carriers’ bottom lines. ARPU at these firms is also expected to fall between 3% to 5%.

Bharti Airtel is expected to report an 18% slump in net profit, while Idea Cellular may see a 15% profit slide. Analysts at HSBC Global Research, CLSA and Moital Oswal said Reliance Communications, which is $7 billion in debt, may post a steeper fall in earnings – between 65% and 77% year-on-year.

Industry observers also pointed out that Bharti’s performance for the quarter could not be accurately accessed due to its poorly-performing Africa operations.

Mobile number portability was introduced to the country in January, and the scheme has since witnessed Vodafone Essar enjoying the largest number of customer additions. Analysts are, however, divided on number portability having a great impact on carriers’ margins, given the largely pre-paid nature of India’s market.

Industry observers were also of the view that the full impact of 3G rollouts and mobile number portability will only be felt in the quarters to come. The country’s telecoms market is highly competitive due in part to the large number of players, with carriers’ costs already impacted by astronomical spectrum license fees.

Regulatory changes and potential consolidation are, however, expected to help stabilize India’s high-growth market in the coming years.

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