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Bharti Sees Big Q3 Profits

Bharti Airtel Ltd. (Mumbai: BHARTIARTL) saw its profits more than double during the fiscal third quarter as it added a record 4.91 million new mobile subscribers and bhoosted margins in the face of falling call charges. (See Bharti Reports Q3.)

India’s largest mobile operator reported a net income of 12.15 billion rupees (US$275 million), up 123 percent from the third quarter last year. Revenues of Rs49.13 billion were up 62 percent. Those figures beat analysts’ expectations of a Rs10.74 billion net income on revenues of Rs46.83 billion.

Bharti’s share price rose by as much as 3.61 percent on the Bombay Stock Exchange on Tuesday, before closing 1.89 percent higher at Rs689.15 ($15.61).

Bharti reported an EBITDA margin of 40.8 percent, compared with 37 percent in the third quarter of 2005. Economies of scale and subscriber growth were able to offset a 3 percent decline in average revenue per user (ARPU) from Rs470 ($10.7) to Rs427 ($9.7).

The operator’s total subscriber base stood at 33.71 million at the end of December, of which 31.97 million were mobile customers and 1.74 million were fixed line and/or broadband customers.

The company also announced a series of initiatives approved at its board meeting yesterday. It’s buying out Singapore Telecommunications Ltd. (SingTel) (OTC: SGTJY) from their joint venture submarine cable system, Network i2i, for $110 million. The deal is part of Bharti’s strategy to have a global subsea system to take advantage of growing demand for bandwidth.

“We see huge potential in international traffic, not only just voice but particularly data and broadband. I think the growth we are seeing in India, particularly with the corporates, is stunning,” Rajan Mittal, Bharti’s joint managing director, told analysts on a conference call.

“We would like to have a network across the world on a redundant basis, but that doesn’t that mean that we are going to build our submarine cables everywhere,” he said.

Mittal said the investment was likely to be in the "few hundred million" range, rather than the $1.5 million that rival Reliance Communications Ltd. (RCom) is investing in expanding its FLAG Telecom Ltd. network.

Bharti also announced plans to spin off control of its mobile base station infrastructure to a separate holding company, Bharti Infratel Ltd., that would focus on facilitating infrastructure sharing with competitors. That follows similar moves by Reliance, which could publicly list its tower company. The Telecom Regulatory Authority of India (TRAI) has been pushing mobile carriers to share their infrastructures so they can cut the cost of expanding network coverage outside of India's urban centers.

Mittal said Bharti wants to "take the leading steps to accelerate the sharing and bring down the costs on networks, which are, I think, very high for all the operators."

The carrier has set aside a capex budget of $2.5 billion for the fiscal year to March 2008, which Mittal said would give it "first-mover advantage" in providing mobile services to smaller towns and villages before competitors can get there. Infrastructure sharing will also make it cheaper for the carrier to expand into new areas, he said.

While it irons out the details of an IPTV launch expected in the fiscal first quarter, Bharti's board also approved a move into the satellite TV space, which will allow it to diversify revenues and reach a wider audience than India's limited number of broadband subscribers.

— Nicole Willing, Reporter, Light Reading

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