India's largest mobile operator, Bharti Airtel, reported that its net profit for the quarter ended June 30 was down 37 percent to 7.62 billion rupees (US$135 million), even as its revenue and number of customers grew in India, Bangladesh, Sri Lanka and 17 countries in Africa.
Telecom revenue in India, its largest market, has been depressed due to "hyper-competition and recent regulatory and tax developments," including a hike in tax levies, the company said in a statement. Falling average revenue per user (ARPU) and high debt have also dragged down Airtel's profit.
The company had 194 million subscribers in India, Bangladesh and Sri Lanka at the end of the quarter, of which about 187 million were in India.
Subscriber additions in India no longer translate into large revenue, and can in fact be a drag on profit as operators expand into rural markets, and also address the trend for users to have more than one connection, said Kamlesh Bhatia, research director at Gartner.
The uptake for data services in India has also been far lower than was expected. Operators like Airtel have rolled out 3G services, but these haven't taken off, Bhatia said. Airtel has also rolled out 4G services in two Indian cities, Bangalore and Kolkata, but it may be too early to evaluate consumer interest in the TD-LTE service, he added.
Airtel's ARPU in India was down by 3 percent year on year, to 185 rupees per month.
The company said revenue grew in the quarter by 14 percent, to 193.5 billion rupees, while its mobile customer base grew to 250 million, up by 13 per cent from the same period a year earlier. Revenue from operations in Africa grew 31.5 percent, but the company continues to suffer a loss in that business.
Net loss in Africa in the quarter ballooned to 6.7 billion rupees, compared to a loss of 3 billion rupees in the same quarter last year, even as the number of customers increased to 56 million from 46 million a year earlier.
Bharti Airtel's profit has been declining over the last 10 quarters, largely because of interests costs in connection with borrowings for its 2010 acquisition of the operations of Zain Africa in 15 countries, fees for 3G licenses and spectrum in India, and growing competition in the market.
Airtel was carrying a net debt at the end of the quarter of 682 billion rupees, up by 14 percent from 600 billion rupees a year ago.
India's mobile market is in turmoil after the country's Supreme Court ruled in February that 122 2G licenses in 22 services areas were allotted improperly. The court ordered that the licenses should be cancelled and auctioned within four months, putting at risk the Indian operations of foreign operators like Telenor, Sistema, and Etisalat. The auction now likely in November presents an opportunity for Airtel and other big players to get more spectrum, but operators are complaining that the floor price for the auction is too high.
New competitors are also expected with a large business group Reliance Industries said to be planning to roll out nationwide 4G services. Regulatory issues relating to spectrum pricing, rules for merger and acquisitions, and spectrum sharing are still unsettled making it difficult for operators to make investment decisions, Bhatia said.
This story, "Mobile Operator Airtel's Revenue Up, but Profit Continues to Slump" was originally published by IDG News Service Bangalore Bureau.