India and Africa operator Bharti Airtel saw profits fall during its first fiscal quarter. The company faced additional regulatory and tax burdens in the Indian Market. A greater proportion of revenue has also been spent on investment in Africa. This is the tenth straight quarter where profits have declined. The squeeze of margins has been attributed by observers to tough competition.
In a statement, Sunil Bharti Mittal, chairman and MD of the company, attributed decreased profit in India to territorial factors: “Telecom revenues in India have been depressed due to hyper-competition and recent regulatory and tax developments,” while on the African side he claimed Bharti was “gaining market share, benefiting from the significant investments made in the last two years.”
For the quarter ending on the 30th of June 2012, the company announced net income of INR7.62 billion (US$138.6 million), down by 37.3 percent from INR12.2 billion. Revenue actually increased to INR193.5 billion, up 14 percent from INR169.7 billion.
The company reported that “stagnant EBITDA coupled with higher depreciation and amortisation arising from enhanced capex and licence fees” resulted in lower profits. Indian revenue from subscribers was hit by additional regulatory and fiscal burdens to the market.
Earnings before taxes and interest payments in Africa increased from US$979 million to US$1.1 billion, but the company warned of future political difficulties on the horizon and the potential for declining aid payments to the region to impact demand.
Bharti Airtel has invested heavily in market operations in Africa and network capabilities. There have been increased advertising and sped-up network rollouts. Products like 3G and Airtel Money are being offered to encourage growth. The company is also targeting the Rwandan market. This resulted in the higher proportion of investment but the company have confirmed to analysts that they may deliver on African targets later than hoped.