Bharti Airtel Expands Into Seychelles, Even as Profits Dip

Indian mobile operator, Bharti Airtel, said on Wednesday that its board had approved its acquisition of Telecom Seychelles in a deal valued at US$62 million, in its bid to increase its presence in Africa.

The Seychelles operator has a 57 percent share of the market and offers 3G mobile and fixed telephone service, Bharti Airtel said in a filing to the Bombay Stock Exchange.

The company has been on a buying spree. Earlier this year, Bharti Airtel acquired Zain Africa B.V. in a US$10.7 billion deal. Zain Africa had operations in 15 African countries.

The financing of the Africa deal, the high cost of 3G licenses in India, and a fierce tariff war in India's mobile services market, however, have cut into Bharti Airtel's profits due to higher interest payments.

The company, which also on Wednesday announced its results for the quarter ended June 30, said its net profit fell 33 percent to Indian rupees 16.8 billion (US$362 million) during the quarter, largely on account of higher interest payments. Its interest expenses were rupees 4 billion in the quarter, compared to interest income of rupees 1.2 billion in the same quarter last year.

The company had a net debt of rupees 602 billion at the end of the quarter, which includes loans raised for the acquisition in Africa and for the 3G auction.

The quarter also witnessed the adverse impact of the strengthening of the US dollar against the rupee and several African currencies, Bharti Airtel said.

The company's revenue increased 17.4 percent during the quarter, to rupees 122 billion. The revenue figure includes revenues from the African operations for 23 days starting June 8.

The company's results for the quarter are in accordance with International Financial Reporting Standards (IFRS).

Bharti Airtel has bagged licenses to offer 3G in 13 service areas in India, and broadband wireless licenses in 4 areas, which were acquired at a total cost of about rupees 156 billion. The spectrum for these licenses is scheduled to be allotted to operators by the government after September.

The expansion of the company's existing network has been held up by new government rules that require service providers to obtain security clearance from the government for the import of equipment. Capital spending was restricted because of delays in security clearance for equipment imports, Bharti Airtel said.

Chinese makers like Huawei and ZTE, which are a favorite with many Indian operators, say that orders placed to them have not been cleared by the government since February. But the government insists that there is no ban on equipment from any specific country.

Bharti Airtel had 177 million mobile subscribers at the end of the quarter. India is still the largest market for the company with 136.6 million mobile subscribers, while its African operations had 36.4 million subscribers. The company also has about 1.4 million subscribers in Sri Lanka. It also has a 70 percent stake in Warid Telecom in Bangladesh which had over 2.5 million subscribers.

Bharti Airtel also offers fixed line and digital TV services.

Indian mobile companies are seeing their average revenue per user (ARPU), and minutes of utilization by customers decline, because of tariff wars between operators, and also as they expand into less lucrative rural markets. Bharti Airtel saw its ARPU drop 23 percent to rupees 215 in the quarter from last year. The company's average rate per minute was down 23 percent to rupees 0.45. The average minutes per user however remained steady from last year at 480 minutes.

Mobile operators have tried to increase their revenue through value added services such as SMS (short message service), ring tones, music downloads, and data connections. Non-voice revenue accounted for 11.6 percent of Bharti Airtel's revenue in the quarter.

In the African market, non-voice revenue accounted for 7.9 percent of total revenue.

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