Bharti Airtel Ltd's better-than-expected operating performance and higher margins reinforced expectations that India's long-suffering mobile phone services market is turning the corner even as the market leader reported its 15th consecutive quarter of declining profit.
Bharti (New Delhi, India) shares were trading up 3.5 percent at 353.70 rupees in morning trade after rising as much as 5.5 percent in a Mumbai market that was up 0.2 percent.
The outlook for bigger Indian carriers like Bharti Airtel, Vodafone Group Plc's (Newbury, UK) local unit and Idea Cellular (Mumbai, India) has improved this year after a court order invalidated the licences of several smaller companies, forcing them to either shut or scale back operations.
The remaining carriers increased call prices earlier this year, the first such hike in almost three years and they continue to cut discounts, taking advantage of reduced competition. Voice calls are the mainstay for Indian phone carriers, accounting for 85 percent of the sector's revenue.
Bharti's consolidated net profit fell to 5.12 billion rupees ($83 million)for its fiscal second quarter ended September 30 from 7.21 billion rupees a year earlier, said New Delhi-based Bharti Airtel, the world's No.4 mobile phone carrier by customers.
A weak rupee led to forex losses of 3.42 billion rupees in the latest quarter, it said.
Analysts on average expected a net profit of 6.90 billion rupees for the company, nearly a third owned by Southeast Asia's top phone carrier SingTel (Singapore).
The company reported an EBITDA (earnings before interest, taxes, depreciation and amortisation) margin of 32 pct, higher than 30.6 pct in the year-ago quarter.
Bharti and its main rivals do however face a steep increase in the cost of radio spectrum and hundreds of millions of dollars in government fees and fines after a upheaval in rules after a massive telecoms licensing scandal that came to light in 2010.
In India, Bharti's monthly average revenue per user, a key metric for telecommunications companies, fell 4 percent 192 rupees from the previous quarter.
Total voice minutes sold fell 3 percent sequentially in what is typically seen as a seasonally weak quarter for Indian carriers as frequent power cuts in rural areas and network outages during monsoon rains hurt traffic growth.
Separately, Bharti's African business, which it acquired for $9 billion in 2010, has yet to turn a profit, weighing on its consolidated earnings. In Africa, monthly average revenue per user rose 5 percent to $5.7 sequentially.
The company's consolidated net debt was at $9.7 billion at end-September.
"Even as we need sustenance of good performance in Africa to change our view there, the quarter provided ample data points to support out positive view on the India wireless business," Kotak Institutional Equities said in a report.
Bharti, which launched high-speed 3G data networks in 2011, is pushing to increase its revenue share from the premium services that offer higher margins than bread-and-butter voice operations.
The company has also launched 4G networks in some cities and this month took full control of a joint-venture 4G broadband business a year earlier than planned, signalling its intent to expand the services rapidly.
Idea Cellular Ltd, India's No.3 carrier by revenue, last week reported quarterly profit surged, but operating metrics such as average revenue per user and sales of call minutes fell.
Bharti Airtel operates across 20 countries in Asia and Africa. India is its main market accounting for about 70 percent of the total revenue.
(Additional reporting Abhishek Vishnoi; Writing by Devidutta Tripathy and Aradhana Aravindan; Editing by Matt Driskill)