SingTel subsidiary's earnings 37% below consensus expectations

Bharti's net profit was hurt by rising competition and expenses.

Here's more from DBS:

Bharti hurt by rising competition with net profits 37% below expectations.
1Q12 profit of Rs.7.6bn (-37% y-o-y and -34% q-o-q) was 37% below consensus expectations of Rp12.15bn due to a sharp decline in EBITDA margins in India to 31.8% from 35.3% in March 2012, because of rising expenses. High depreciation and finance expenses in Africa had resulted in losses from Africa widening by 120% y-o-y to Rs. 6.7bn.

We had highlighted rising competition in our note on 2 July. Indian operators, including Bharti had lowered tariffs to 0.5 paisa per sec from 1.0 paisa through discount vouchers. At the same time, dealer commissions have also been raised substantially.

SingTel’s earnings trimmed slightly. Bharti is not willing to lose revenue share and intends to remain aggressive in preventing that from happening. We have lowered Bharti’s FY13F/14F earnings by 30% each, implying flat earnings in FY13F (with downside risks). After raising contribution from AIS and Telkomsel slightly, our SingTel’s FY13/14F earnings are trimmed 2%/3% respectively.