Bharti Airtel dips on African operation concerns/news06012012

Shares of Bharti Airtel shed over 4%, touching the weekly low of Rs328.75, as the street was concerned about operations in Africa.

In Nigeria, the government has cut fuel subsidy which could double retail prices of petrol or gas. Analysts highlight that this could reduce the telecom usage in that country and increase cost of operations.

Nigeria accounts for a third of Bharti’s Africa operating profits and 9% of the total. With the competitive pressure surging in India, this could hurt the company’s profitability going forward.

“While this is leading to a sharp civil and political backlash, we note that if approved, a sharp rise in fuel and transportation costs could impact usage for the telecom operators,” said securities firm Religare.

“Further network operating costs account for about 16-18% of revenues and we estimate fuel costs to account for nearly 50 per cent of these costs
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