By Zeba Siddiqui and Nivedita Bhattacharjee

Oct 21 Idea Cellular Ltd, India's third-biggest mobile operator, posted quarterly net profit slightly below analysts' expectations, hit by a drop in call rates and intense competition on mobile data charges.

Call rates have become cheaper in the past few months, hurting the entire mobile industry. But Idea lagged rival Bharti Airtel in adding new customers to its network in July and August.

"The telecoms industry facing a number of challenges. Higher competition in mobile data is impacting the telecoms sector adversely," Chief Executive Himanshu Kapania told reporters on Wednesday.

The mobile carrier also lagged bigger rival Bharti Airtel in launching the newer and faster fourth-generation (4G) mobile Internet services, demand for which has exploded in India with a rapid proliferation of cheap smartphones and a booming internet based startup industry.

Airtel has been expanding its service to cover nearly 300 towns, as it prepares for competition from Reliance Jio, the telecoms unit of Reliance Industries Ltd, which plans to roll out 4G this year.

"We are gearing ourselves to launch digital services in the next financial year. Our current intention is to launch Idea music, Idea movies, Idea games. Work is in full swing for all of these," Kapania said.

Idea, part of the Aditya Birla conglomerate and nearly a fifth-owned by Malaysia's Axiata, said in July it planned on launching 4G LTE services in about 750 cities and towns by 2016.

Net profit tax for the quarter ended September 30 after was 8.09 billion rupees ($124.2 million) in the quarter ended Sept. 30, compared with 7.56 billion rupees a year earlier.

Analysts, on average, expected a profit of 8.26 billion rupees, according to Thomson Reuters data.

Idea posted consolidated revenue of 86.89 billion rupees, 1.2 percent lower than a year earlier. ($1 = 65.1600 Indian rupee) (Reporting by Zeba Siddiqui and Nivedita Bhattacharjee in Mumbai; Editing by Anand Basu and Keith Weir)