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India's Carriers Report Major Growth

Phenomenal growth in mobile uptake is giving India's leading operators a financial boost, according to the latest earnings reports.

According to the Telecom Regulatory Authority of India (TRAI) , the country added 12.91 million mobile subscribers during the quarter ended June 30, bringing the country's total number of wireless subscribers to 105.95 million. Its total telephony subscribers stood at 153.37 million.

Riding that growth, India’s two largest service providers, Bharti Airtel Ltd. (Mumbai: BHARTIARTL) and Reliance Communications Ltd. (RCom) both beat analysts’ expectations for their quarters ending June 30.

GSM operator Bharti, which holds a 22.5 percent share of India's mobile market, reported a 48 percent increase in net profit from a year ago to 7.55 billion Rupees (US$160 million). (See Bharti Airtel Reports Q1.)

Analysts had predicted a net profit of Rs. 7.15 billion ($153.38 million), according to Reuters.

Bharti's revenues grew by 53 percent year on year to Rs. 38.56 billion ($827.2 million) as its mobile customer base soared 88.2 percent to 23.07 million users. Its total customer base including fixed-line users reached 24.58 million.

Reliance, which has a 20.6 percent share of the mobile market, yesterday posted a net profit of Rs.5.13 billion ($112 million) on revenues of Rs. 32.5 billion ($710 million). (See Reliance Reports Profit.)

The company didn’t exist in its current form a year ago, so it noted that the net loss of Rs 2.5 billion ($57 million) on revenues of Rs. 22.83 billion ($518 million) stated for last year are not directly comparable.

Reliance, which is predominantly a CDMA operator but which has some GSM operations too, ended the quarter with 22.52 million mobile customers, snapping at the heels of Bharti. (See Reliance Squeezed by Spectrum Crunch.)

Both Reliance and Bharti reported growth in revenues from value added services. Bharti said they accounted for 10.8 percent of its revenues this quarter, compared with 10.2 percent last year, while users of Reliance's wireless multimedia services increased 24 percent sequentially to 7.9 million subscribers.

Reliance is also on a broadband expansion kick, with a focus on building out its network in India’s 30 largest cities. The number of buildings on-net increased 77 percent from last quarter, and the carrier’s broadband revenues grew by 16.6 percent to Rs. 2.3 billion ($49.4 million). The bulk of its broadband users are enterprise customers.

Regional carrier Idea Cellular Ltd. has an 8.1 percent share of the mobile market, and saw revenues from its business in Eastern India grow by 30.6 percent from last year to Rs.9 billion ($193.07 million). (See Aditya Birla Reports Q1.)

IDEA's subscriber base jumped 53.7 per cent to 8.54 million and the operator is in expansion mode as it looks towards building networks in India's high-growth cities. (See Birla's Big IDEA for India.)

That the bulk of India's telecom growth is coming from the mobile sector is clear from the financials of state-owned carrier Mahanagar Telephone Nigam Ltd. (MTNL) . The company operates in the cities of Mumbai and New Delhi, where it has 3.85 million fixed-line customers and 2.2 million mobile customers. MTNL reported a slight decline in revenues for the quarter, from Rs. 13.95 billion ($297.11 million) to Rs. 13.62 billion ($292.18 million), and a 17.1 percent drop in net profit.

In a sense, India's telecom market is much like any other -- fixed-line voice revenues continue to decline as customers substitute wireline services for mobile, while multimedia and broadband services continue to take off.

In addition to its red-hot wireless market, India remains a primary outsourcing destination for telecom companies abroad, and the country's outsourcing service providers are seeing plenty of business come their way.

TransWorks Information Services Ltd. , owned by IDEA’s parent company Aditya Birla Group , offers business process outsourcing (BPO) services, including accounting and human resources. It saw revenues rise by 26.6 percent year on year to Rs. 481.3 million ($10.32 million) last quarter following an increase in demand from existing customers and contracts with three new major customers.

Patni Computer Systems Ltd. (NYSE: PTI), which performs product development and provides infrastructure services in various vertical sectors, reported its revenues increased by 10.2 percent to Rs. 6.56 billion ($143.03 million) during the second quarter, and saw double digit revenue growth from the telecom sector. (See Patni Ups Revenues.)

Light Reading has launched a "Who Does What: Outsourcing to India" report that categorizes outsourcing services companies -- and invites input on those we don't know about -- ahead of a survey to be conducted by Heavy Reading that will gauge how highly they're rated by their telecom customers.

— Nicole Willing, Reporter, Light Reading

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