Quarterly net profit slumped 24 per cent at Rs 762 crore against Rs 1,006 crore in the previous quarter and much lower than estimates of nearly Rs 1,200 crore. Bharti Airtel had reported Rs 1,215 crore in net a year earlier.
"At first impression, Bharti Airtel's headline numbers are weak with domestic volume growth of just 3.9 per cent while pricing fell 2.6 per cent, sequentially," domestic brokerage firm IDFC said in a report.
Bharti said the new TRAI guidelines on combo packs hit revenues. The hike in service tax impacted revenues by 2 per cent, the company added.
Ebitda margins, a key measure of profitability, also declined to 30.2 per cent against 33.3 per cent quarter-on-quarter.
"The ebitda is much lower than expectations... nearly Rs 500 crore below our expectations. This might be because of a regulatory provisioning," Karan Mittal of ICICI Securities told NDTV Profit.
Consolidated sales rose 3.3 per cent sequentially at Rs 19,350 crore against Rs 18,729 crore in the March quarter. That was nearly Rs 100 crore less than estimates.
Shares in the company fell sharply to the lowest level in more than two months. Bharti shares traded at the bottom of the 50-share Nifty index, down 3 per cent.
"Telecom revenues in India have been depressed due to hyper-competition and recent regulatory & tax developments,” chairman Sunil Bharti Mittal said.
Bharti dominated customer additions in the three months to June while its smaller rivals including Telenor's India unit braced for a cancellation of their operating permits.
Still, the market of more than a dozen players remains highly competitive, with most carriers in the once-booming sector languishing in the red.
Voice call prices -- the mainstay of Indian mobile carriers -- have been stable in recent months, but the market is yet to recover from the sharp price cuts during a price war two years ago. Mobile data is at a nascent stage.
At a time when growth in its home market had started slowing, Bharti in 2010 ventured into Africa by acquiring Kuwaiti telecoms Zain's operations in 15 countries in a $9 billion deal and became the world's fifth-biggest mobile phone carrier by subscribers.
But high costs in Africa have kept margins under pressure and Bharti has yet to turn the African operations profitable.
The Supreme Court of India said it would revoke all permits awarded to eight of Bharti's rivals such as Sistema and Idea Cellular in a scandal-tainted 2008 sale. The government is planning to hold a mobile airwaves auction in November before the permits expire.
Carriers have complained that the minimum bid price is too high, with Telenor and Sistema threatening to pull out of India if the auction becomes too costly.
Bigger carriers such as Bharti and Vodafone's local unit are not affected by the court order, although they are looking to buy more airwaves to feed their overstretched networks in the world's second-biggest mobile phone market.
Bharti, nearly a third owned by Southeast Asia's top phone carrier SingTel, operates in 20 countries across Asia and Africa and is the world's fifth-biggest mobile phone carrier by subscribers.
(With inputs from Thomson Reuters)