beyondbrics

Shares in Bharti Airtel, India’s biggest mobile carrier, closed down 6.58 per cent Wednesday – compared to a 0.48 per cent gain in the Bombay Stock Exchange’s benchmark Sensex – after the company released results for the quarter ending in December that revealed its eighth straight loss in quarterly profits.

The drop in the share price erased most of the gains the company had made after the licenses of some of its smaller rivals were pulled by the telecoms ministry last week.

But the world’s fifth biggest carrier found a bright spot in Africa, where, despite the fact that the business has yet to turn a profit, the company’s huge investments are finally starting to bear fruit.

As beyondbrics reported, the company’s African operations were weighing the company down as recently as the quarter ending in March 2011, but analysts said that going forward, as growth in India stagnates, Africa is likely to prop the company up in the near-to-medium term.

“In the next quarter I see the environment not changing for Bharti … but I think the trigger has to come from African side; from the Indian side there doesn’t seem to be much of a trigger,” said Deven Choksey, managing director of investment broker KR Choksey. “I think they will start generating more subscribers [in Africa] and then will get more volume going forward which has resulted in higher amount of operating surplus even after investing in Africa.”

By September 2011, Bharti had invested $575m in the region, up from just $84m a year earlier, after entering the continent by buying the African assets of Zain, a Kuwaiti operator, in 2010 for $10.7bn. Considering the near saturation point being reached in the Indian market – estimated at 97 per cent of the country’s population by 2014 – it is easy to see why Bharti is pumping money into the new region.

The company recorded a 22 per cent drop in consolidated net profits to $205.8m during the quarter ending in December, down from $265.4m during the same period a year earlier. Total revenues rose 17 per cent to $3.76bn. Revenues from the company’s Africa operations, meanwhile, rose 16.1 per cent, year-on-year, to $1.06bn.

Bharti’s African investment first started to pay dividends when revenues from Africa crossed the $1bn per quarter mark for the first time in the quarter ending in September, an increase of 23 per cent over the previous year. That compares with revenues of $248m from the continent in the quarter ending June 2010, its first full quarter in Africa. Its revenues from Africa had risen to $924m by the quarter ending December 2010.

African operations showed a net profit loss of $52.8mn for the quarter, down more than half from $106.8m during the same period a year prior.

Bharti is “moving steadily” towards its fiscal 2013 goals of achieving $5bn in revenue and $2bn in EBITDA from Africa, Manoj Kohli, Bharti Airtel’s chief executive for international operations, told reporters, according to Reuters.

“In the near-term, the company will face some pressure due to high loan repayments costs and competitive pressure in the Indian market, but turnaround in Africa business will drive its performance in the medium to long-term,” RK Gupta, a fund manager at Taurus Mutual Fund, which owns Bharti shares, told Reuters.