Bharti sees price war hurting growth; shares dive

Bharti, whose tie-up talks with South Africa's MTN collapsed last month for a second time, denying it access to vast new markets and revenue streams, is facing tremendous competition at home.

Four new firms, including ventures of Telenor and Etisalat, are set to start operations this year and existing firms are scrambling to sign up users before then by drastically dropping call charges.

"There is clearly more pain left in the sector as competitive pressure is expected to intensify in the months ahead," said R.K. Gupta, managing director of Taurus Mutual Fund, which holds Bharti stock.

"Margins of these mobile companies will remain under pressure for some time. I don't think anyone should think of taking fresh exposure in telecom stocks at this point in time."

Shares in Bharti, India's seventh-most valuable firm with a market value of about $25 billion, fell as much as 6.9 percent to its lowest in seven months.

By 0800 GMT, the stock was down 5.4 percent at 295.10 rupees in a firm Mumbai market, with 4.7 million shares changing hands, more than two-and-a-half times the 90-day average.

Bharti, which has more than 23 percent of India's 470 million-plus mobile subscribers, will be forced to match rivals' prices to retain its market share, but any such move would mean sacrificing revenue and earnings growth, analysts say.

A new per-second billing plan from sixth-ranked Tata Teleservices helped it add more users than Bharti in the September quarter, and a move by second-ranked Reliance Communications to cut all call charges to 50 paise (U.S. 1 cent) a minute is seen shaking up the sector.

"With this competitive intensity and irrational pricing in some pockets, it is possible in the short-term we could see some impact on the growth," said Akhil Gupta, deputy group CEO at the mobile firm's parent Bharti Enterprises.

"We will be competitive, (but) there is no reason why we should match always the lowest common denominator," he said.

Bharti, which failed to seal a $24 billion tie-up with MTN that could have led to a full merger, said it would continue to look at overseas expansion opportunities but was not desperate for a deal.