Thursday July 23, 05:33 PM
India's Bharti profits jump 24 pct, still in MTN merger talks
By Penny MacRae
NEW DELHI (AFP) - India's top mobile company, Bharti Airtel, reported Thursday that first-quarter net profit jumped 24 percent and said it was still in merger talks with South Africa's flagship MTN cellular group.
Bharti said net profit for the three months to June 30 rose to 25.17 billion rupees (526 million dollars) on revenues which jumped 17 percent to 99.42 billion, helped by strong subscriber growth especially in rural areas.
"This good performance validates our rural thrust and investments in the past three years," said Bharti Airtel chairman Sunil Bharti Mittal.
The profit growth was in line with analysts' forecasts but slowed from previous quarters in what the company called a "hyper-competitive environment."
A decline in average revenue per user -- a key industry measure of profitability -- also fuelled investor concern that Bharti's profitability was increasingly dependent on lower spending customers in rural areas.
Bharti shares closed down 1.09 percent or 8.95 rupees at 813.90 rupees.
Bharti would not elaborate on its merger talks with MTN that the two firms say would create an "emerging market telecom powerhouse" with more than 200 million subscribers and 20 billion dollars annually in revenues.
"We are still in talks -- that is all I can say," Akhil Gupta, deputy chief executive officer of parent company Bharti Enterprises, told reporters.
The two companies have said they will hold exclusive negotiations until July 31 for the cross-shareholding pact that would involve 10 billion dollars in cash and 13 billion dollars in stock.
Bharti, in which Singapore Telecommunications has a minority holding, would be the single largest shareholder, taking a 49 percent stake in the South African company. MTN would have an effective 36 percent stake in Bharti.
Analysts said they believed the two companies might extend the exclusive talks but were cautiously optimistic about an agreement.
The managements of the two firms must "agree to the price and structure and everything. The exclusive period of negotiations may be extended," said Sanjay Chawla, senior vice president of investment house Anand Rathi.
But he told AFP "there could be an eventual deal."
Bharti hung up on talks a year ago with MTN after the South African firm proposed an ownership structure that the Indian company said would have involved "Bharti Airtel becoming a subsidiary of MTN."
This time "they seem to be treading cautiously and very carefully to make sure every issue is ironed out," said Angel Broking analyst Harit Shah. "My gut feeling is it will probably go through."
But some analysts said Bharti might have to sweeten its bid to win MTN shareholder approval.
The talks are part of Bharti's drive to keep up its growth momentum along with its rapid push into rural India, home to 70 percent of the nearly 1.2 billion population.
Bharti posted 48 percent year-on-year growth in mobile customers to hit 102.37 million subscribers, making it one of the world's leading cellular providers.
About 60 percent of additional customers in the first quarter came from rural areas, the company said.
The company is now "primarily focused" on moving into the rural market, said Bharti Airtel chief executive officer Manoj Kohli, adding rural mobile penetration was still just around 10 percent.
"There's no other way to grow except rurally as the urban centres are getting saturated," said Angel's Shah.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
