After hectic overseas borrowing in 2004, Bharti Tele Ventures Limited (BTVL) has made its first overture in the foreign market this year, by way of two loans worth $354 million. The long-term foreign currency loans have been arranged from Swedish Export Credit Agency EKN and FinnFund.

While EKN has provided a $254 million syndicated loan facility, FinnFund has given $100 million. The mandated lender bank for both the syndication facilities was ABN Amro. The FinnFund loan is guaranteed by Finnvera of Finland.

The funds have been arranged at an approximate spread of 35 basis points over Libor. The total cost of funding is about 4.4 per cent, without a currency hedge.The funds have an average tenor of over five years and a door-to-door tenor of 10 years. The entire amount has been drawn down and the principal forex exposure in both loans has been fully hedged.

The company intends to deploy these funds for expanding its mobile service network and rollout in new circles. The EKN loan will be utilised primarily for making payments to Ericsson for supply of capital equipment, while the FinnFund facility will be used for making similar payments to Nokia.

Bharti is currently working on strengthening its position in both GSM and broadband services. It recently added one new circle –­ Bihar including Jharkhand –­ to its 20-circle GSM portfolio. The company has also kick-started the second phase of expansion of its broadband and telephony services by rolling out its services in Noida, Uttar Pradesh. This will be followed by similar rollouts in Ghaziabad, Meerut, Agra and Lucknow, with a plan to invest Rs 1.5 billion across the state for establishing its broadband network.

Bharti's plan is to take its services to a total of 12 states from the existing six (Haryana, Delhi, Madhya Pradesh, Chhattisgarh, Karnataka and Tamil Nadu) under the second phase. After Uttar Pradesh, services will be launched in Punjab, Maharashtra, Rajasthan, West Bengal and Kerala.

In the meantime, Bharti is looking at some quick means of firming up its assets.It has recently acquired the Max Group's very small aperture terminal (VSAT) business. This will take Bharti to the number two spot in the VSAT industry after Hughes Escorts Communications.

However, the ongoing expansion process has squeezed the company's quarterly operating margins despite increased revenues from subscriber additions in the new circles. The operating margins were down to 36.2 per cent in December 2004 from 37.3 per cent in December 2003.

However, overall, the company has continued its march towards sequential improvement in profitability during the quarter. During October-December 2004, Bharti registered total revenues of Rs 21.53 billion, a 70 per cent growth over the corresponding quarter in the previous year.Mobile operations contributed 67 per cent to total revenues while broadband and telephony services contributed 14 per cent to total revenues. The long distance segment accounted for 24 per cent while 7 per cent came from enterprise business services.

The company clocked a much steeper increase of over 131 per cent in its net profits at Rs 3.72 billion over the corresponding period in the previous year. Its total assets at the end of 2004 stood at Rs 159.9 billion.

The topline growth of the company was facilitated by a robust increase in its subscriber base. Bharti's total customer base touched 10.629 million –­ including 9.82 million mobile subscribers and over 0.8 million broadband and telephony subscribers –­ during the quarter ended December 2004. The mobile subscriber base registered a 13 per cent growth over the previous quarter while the broadband and telephony segment saw a 5 per cent increase.

The surge in its mobile subscribers increased its share in the all-India GSM mobile customer base in December 2004 to 26.3 per cent from 25.9 per cent in the previous quarter while its share of net additions during the same period was 29.5 per cent.

The average revenue per user (ARPU) for mobile services improved to Rs 519 at the end of December 2004 from Rs 509 at the end of the previous quarter. However, this was lower than the Rs 555 ARPU in December 2003. In fixed line, the ARPU was Rs 1,265 in December 2003, Rs 1,256 in September 2004 and Rs 1,238 in December 2004.

With the new initiatives the company is taking and increased access to foreign funds, it will hopefully be able to arrest this decline in operating margins.