Bharti Airtel said on Wednesday its second-quarter profit fell 27 per cent to Rs

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1,661 crore from Rs 2,263 crore a year ago as its African operations, started in June, accounted for a loss of Rs 378.80 crore.

It had bought Zain’s African operations in June for an enterprise value $10.7 billion.

The largest telco by revenue and subscriber base also reported a 1.2 per cent decline in net profit on a sequential basis to Rs 1,661 crore from Rs 1681.6 crore.

Net profit fell despite a 47 per cent increase in revenue to Rs 15,215 crore from Rs 10,378.5 crore a year ago. Its operations in India, Bangladesh and Sri Lanka earned Rs 2,039.80 crore during the period.

The result had its impact in the market, and Bharti shares fell 1.77 per cent to Rs 328.15 on BSE as Sensex slid 0.27 per cent to 20,875.71 points.

“We have arrested the declining trend in value and revenues and our new subscriber additions are up 57 per cent, from 2.4 million in the previous quarter to 3.7 million this quarter. We also had a 30-40 per cent premium in tariffs in certain markets that were not sustainable, so we have modified our rates. However, we are retaining our pricing power and have no intention of starting a tariff war in Africa,” said Manoj Kohli, CEO (international) and joint managing director, Bharti Airtel.

He said the Airtel brand would be launched in Africa in the next few weeks, instead of October.

The firm’s mobile market share in India has fallen to 20.8 per cent from 23.4 per cent a year ago as new players lowered its share of net subscriber additions to 12.8 per cent from 18.3 per cent. Average revenue per user (ARPU) dropped 6 per cent sequentially, from Rs 215 to Rs 202, though non-voice revenues rose 1.1 per cent.

“We will never have a case where ARPUs will go up. However, we expect them to stabilise soon while the minutes of usage are holding up – above 400 minutes,” said Sanjay Kapoor, CEO, India and south Asia of Bharti Airtel.

Meanwhile, Bharti Enterprises group CFO Manik Jhangiani said it would pre-pay part of the debt taken to buy Zain Africa. “We will be prepaying about $800-900 million in this quarter.”

The company's ebitda from mobile services, its mainstay, in south Asia has declined 7 per cent to Rs 3,096 crore in Q2 from Rs 3,331 crore a year ago. Ebitda margins too fell from 40.2 per cent to 35.2 per cent.

The company, which plans to start 3G services by year-end, said there was little likelihood of a tariff war. “I don’t think rationality and logic support a 3G tariff war and considering the high spectrum fees paid, I don’t think there will be any deep discounts in 3G,” said Kapoor. Bharti Airtel had paid Rs 12,296 crore for 3G spectrum in 13 circles.

“The African business is expected to continue exerting pressure on profitability as the company is adopting a strategy of garnering market share by exploiting the high elasticity in these markets. The bottom line is further expected to be impacted as tax rates in African countries are 30 per cent plus,” said Srishti Anand, IT and telecom analyst at Angel Broking.

A Religare Capital Markets report said a fall of only 1 per cent in ARPM (average revenue per minute) from 44.8 paise in Q1 to 44.4 paise in Q2 indicated that competitive pressure had peaked.

“We expect tariff pressures to continue to moderate, leading to a pick-up in growth in the domestic market. The Africa performance was mixed with strong subscriber addition but lower margins. We expect Africa to drive growth for Bharti over the medium term,” it said.