9 November 2012

Kenya: Airtel's Africa Losses Extend Further to Sh8.4 Billion

Airtel Africa losses increased by 26 per cent in the quarter ending September 30 as the parent company looks to increase call tariffs in its home market to rescue revenues.

The company reported a 5.39 billion rupees loss (Sh8.4 billion) in Africa compared to a 4.27 billion rupees (Sh6.7 billion) loss the previous period.

The parent company's Bharti Airtel's quarterly profits fell by 30 per cent to 7.21 billion rupees (Sh11.3b). In the India market,according to the India Times, Bharti Airtel is considering hiking tariffs as margins get hurt.

"The current tariffs do not even cover marginal costs for most operators. So from an economics perspective, do we need to increase prices? The answer is yes," Bharti Airtel chief executive (India and South Asia) Sanjay Kapoor said on the sidelines of the World Economic Forum.

The company's market strategy has been the low cost model. It has been implementing this pricing strategy in Kenya since entry in 2010 and it remains to be seen if the price hikes will affect all its markets.

"Our increased investments and product innovation have played a significant role in improving the industry quality of service and product offering to the Kenyan consumers," said Shivan Bhargava, managing director, Airtel Kenya.

"By taking the competitive landscape a notch higher, challenging our competitors to offer more value to the consumers who now continue to receive world class service at more affordable prices than ever before," he said.

The company has been pushing for further cut in Mobile Termination Rates which ideally should see the cost of cross network call go down. But Bhargava said last month the price may not be cut immediately as they plan to re-invest the money saved on MTR in infrastructure.

In Africa, Airtel saw improvements in the consolidated revenues which went up by 29 per cent, fueled by a 21 per increase in customer base. It also saw a 32 per cent traffic increase and 56 per cent increase in non-voice revenues.

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