Mumbai, India - Bharti Airtel, India's largest mobile phone company, on Friday reported a slight rise in quarterly profit amid a price war that analysts say could turn India's telecom boom into a financial bust.
Net profit for the December quarter rose 2% from a year earlier to 22.1 billion rupees ($478.8m), under US accounting rules. The result met expectations. Revenue grew 1% to 97.7 billion rupees ($2.1bn).
"Bharti Airtel continues to ensure a robust market share despite the hyper competition," chairman Sunil Bharti Mittal said in a statement.
The number of mobile phone users in India is expected to hit 1 billion by 2014, roughly twice what it is now. Such blistering growth has attracted new players like Japan's NTT DoCoMo - which formed a joint venture with Tata Teleservices in June - and sparked a race to the bottom over prices as companies rush to grab market share.
Many companies are now charging for calls by the second, rather than by the minute, with plans for as little as 0.50 rupee ($0.01) a minute.
The four month old price war has hit margins at a time when Indian telecom companies have little scope for cost-cutting, Macquarie Securities analysts said in a report on Wednesday.
They maintain that the "price cut contagion" is likely to spread from retail rates to corporate, wireless data, international roaming and SMS rates as well.
Bharti said it had 125 million customers during the period, up 42% from the same period last year, but the growing crowd in the domestic market has driven Bharti overseas for growth.
Last week, Bharti said it would acquire 70% of Bangladesh's Warid Telecom, and invest $300m to expand its 2.9 million strong subscriber base. It also created a management group to push international expansion beyond India and South Asia.
The company launched mobile services in Sri Lanka in January 2009 and now has more than 1 million customers there.