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Bharti Tele-Ventures forecasts loss peaking in Q2

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CIOL Bureau
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By Sitaraman Shankar



BOMBAY: Bharti Tele-Ventures, investing heavily to expand, expects losses to increase before it produces core profits in mobile and fixed-line projects by December and March, respectively, its chairman said. "You will see a peaking of the company's net losses in this quarter and then a tapering off," Sunil Bharti Mittal told Reuters in an interview.



Bharti, in which Singapore Telecommunications has a 16-percent stake, was India's first mobile operator to go public in January. It offers mobile, fixed-line, national long distance and overseas phone services and Internet access. The company posted a net loss of Rs 676.2 million ($13.88 million) in the April-June quarter, up from Rs 278.3 million a year earlier. Total revenue rose to Rs 5.39 billion from Rs 2.76 billion.



"Analysts expect us to make our first net profit in 2004/05 but I personally believe this will happen much earlier," Mittal said, in the interview held over the weekend. Bharti shares, which have fallen 27 percent since the listing in February, were down 1.69 percent at Rs 32.00 at 0847 GMT, while the Bombay index was down a similar amount.



Mittal said both mobile and fixed-line services would soon start turning in core profits, or earnings before interest, taxation, depreciation and amortisation. "We will be EBITDA positive in all mobile projects by no later than December and in all our fixed-line businesses by March," he said.



Mittal said the mobile service in Bombay, launched in July, would have 300,000 customers by the end of the financial year in March, and more than a million customers by that time in Delhi, where it was launched in 1995. He said Bharti would have added between 600,000 and 700,000 net new mobile customers across the country in the July-September quarter against 255,000 in April-June.



Bharti competes with Hutchison Whampoa's Indian unit, BPL Mobile and state-run Mahanagar Telephone Nigam Ltd (MTNL) and Bharat Sanchar Nigam Ltd (BSNL).



Limited mobility, limited impact?


Mittal said he expected India to have 12 million mobile users by March, soaring to 20-25 million a year later. Part of this surge is expected to come from cheaper Wireless in Local Loop (WLL), or limited mobility services, introduced by state-run firm Mahanagar Telephone Nigam Ltd.



The powerful Reliance group also plans to launch these services and analysts say WLL could have a major impact on mobile operators' revenues. But Mittal said he saw only a limited threat.



"The only impact of WLL is that it will force mobile operators to cut prices further. We can go down in stages to Rs 1.99 for three minutes from a current average of Rs 3.10." He said price cuts would not much affect average revenue per user (ARPU) -- a key measure of a mobile operator's performance -- because volumes were rising and people were talking longer.



"Our prices have come down 35 percent in the last 18 months, but ARPUs have only come down by around 10 percent because people speak more," he said. "Currently our ARPU is 900-1,000 rupees a month. It may come down to 800-900 rupees in two years." "WLL will pick up customers from fixed line consumers. There is a class developing between mobile and fixed line," he said.



© Reuters

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