India's market leader Bharti Airtel has reported a 10th straight decline in quarterly profits. Overcrowding has forced prices to rock bottom, and an uncertain regulatory environment is preventing consolidation.

Even Bharti, a stalwart of India's telecoms growth story, is suffering from cut-throat competition and the hugely volatile regulatory environment.

Bharti, controlled by billionaire Sunil Mittal and nearly a third owned by Singapore's SingTel, saw domestic volume growth of just 3.9 percent while pricing fell 2.6 per cent over the last quarter. That led to a 37 per cent drop in consolidated net profit.

Though Bharti added more subscribers than its rivals over the past three months, average monthly revenue per user fell 2 per cent to $3.36. It was over $9 in 2006.

While the top Indian firms continue to turn a profit, the trend since 2008 has been steady decline. Consumers are highly price sensitive.

Bharti has had to wear narrower margins after customers pushed back on recent attempts to hike prices.

And it is not clear that even cutting the market from 15 players to say even six or seven will have a dramatic effect on firms' ability to raise tariffs.

Regardless of whether expected consolidation takes place at the smaller end of the sector, competition will remain stiff and returns dampened.

The way forward is to boost data usage. At present, revenue from voice makes up almost 95 percent of the sector's revenue.

Advanced markets tend to see more than one third of their revenue from data. As per-capita incomes rise in India, increasing higher value-added services is the most likely way of reversing the decline.

But in order for firms to invest in new platforms and market new products the regulatory environment needs to become more predictable.

The government is seeking to further delay plans to re-auction cancelled second-generation mobile phone licences, and the price of spectrum continues to remain unpredictable with the government toing and froing between various reserve prices for its next auction.

The sector needs a period of stability in order to develop new business models that will raise revenue and reverse the downward spiral in profit.

More data usage will be a boon. Healthier telcos will make a healthier economy too.

CONTEXT NEWS

- India's top telecoms carrier Bharti Airtel reported its 10th straight quarter of profit decline as competition squeezed margins despite gaining a bigger subscriber share. The stock price fell to its lowest level in more than two months.

- Bharti, controlled by billionaire Sunil Mittal, said consolidated net profit fell 37 percent to 7.62 billion rupees for its fiscal first quarter ended June from a year earlier, missing analyst estimates.

- Bharti added customers in the three months to June as its smaller rivals including Telenor's India unit braced for a cancellation of their operating permits.

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.