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Monday, January 24, 2011

3G will boost VAS earnings - Airtel

Bharti Airtel Ltd., India's largest mobile phone operator by subscribers, Monday said it expects third-generation services to help stabilize its fast-dropping average revenue per user--a key gauge of profitability--and add to earnings.
President Mobile Services at Bharti Airtel Atul Bindal, left, with operations Director Vineet Taneja at the launch of third generation services by Airtel.
Third-generation services allow multimedia capabilities on mobile networks and are likely to improve the operating performance of telecom companies as they can charge higher tariffs in a market where cut-throat competition has dented their revenue growth, margins, average revenue per user, or ARPU, and profitability.
ARPUs for Indian telecom operators have also dropped over the past couple of years as companies tapped lower revenue generating rural customers.
"We expect the ARPUs to definitely stabilize to a much greater extent than they would have been otherwise for the very simple reason that there would be an explosion in terms of new products and services on the non-voice side," Atul Mohan Bindal, president of mobile services, said at the launch of the company's 3G services in the southern state of Karnataka.
He expects the 3G offering to attract customers from rival networks, especially after mobile number portability--which lets users change operators without changing numbers--was launched in the country from Jan. 20.
"I cannot put a number to it...But I will be very surprised if it [3G] is not EPS [earnings per share] accretive," Sanjay Kapoor, chief executive of the company's operations in India and South Asia, told reporters.
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Noah Seelam/AFP/Getty Images
A vendor used his mobile phone at a vegetable market in Hyderabad.
Brokerage Motilal Oswal estimates Bharti Airtel's ARPU in India in the quarter ended Dec. 31 to have slipped 1% sequentially, to 200 rupees ($4.4). For the financial third quarter, the company is expected to report a net profit of 15.96 billion rupees, down 3.9% from the previous quarter, on revenue of 158.23 billion rupees, up 4% sequentially, according to the average of estimates in a Dow Jones Newswires poll of 16 analysts.
The company is slated to report its third-quarter results on Feb. 2. Neither Bindal nor Kapoor said if the 3G services would boost ARPUs in the current January-March quarter.
Analysts said operators are unlikely to make any immediate profit on 3G services due to the high costs they incurred to acquire the bandwidth, including interest expenses on debt. Bharti Airtel itself won 3G radio spectrum in 13 of India's 22 telecom circles through an auction last year for 122.95 billion rupees.
The company plans to launch 3G services across all the 13 areas by the end of March. It became the third private operator after Tata Teleservices Ltd. and Reliance Communications Ltd. to launch 3G services in the world's fastest-growing telecommunications market.
Bharti Airtel reiterated that it is in advanced talks with other operators for arrangements to offer 3G services beyond the 13 areas, Mr. Bindal said, without naming the potential partners. Rivals such as Vodafone Essar Ltd., which plans to launch its 3G services during January-March, and Reliance Communications have also said they were talking to operators for similar tie-ups.
State-run Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd.--which didn't have to participate in the auction and were allocated bandwidth in 2008--launched 3G services in early 2009, but have so far received a lukewarm response.
Meanwhile, on mobile number portability, Mr. Kapoor said the service hasn't been a "game changer" in any part of the world, and won't be so in India.
"In fact, more people migrated from one operator to another because [for example] one had an iPhone and the other didn't," Mr. Kapoor said.
The company, India's largest mobile phone operator by subscribers, became the third private operator after Tata Teleservices Ltd. and Reliance Communications Ltd. in launching 3G services in the world's fastest growing telecommunications market.
The company had won 3G radio spectrum in 13 of India's 22 telecom circles through an auction last year for 122.95 billion rupees ($2.69 billion).
State-run Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd.--which didn't have to participate in the auction and were allocated bandwidth in 2008--launched 3G services in early 2009, but have so far got a lukewarm response.
Third-generation services allow multimedia capabilities on mobile networks and are likely to improve the operating performance of telecom companies as they can charge higher tariffs in a market where cut-throat competition has hurt their profitability

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