Reliance Comm net falls 43% as costs pile up

Written by fe Bureau | Mumbai | Updated: Jan 24 2013, 06:34am hrs
The Anil-Ambani controlled Reliance Communications posted close to a 3% rise in sequential profit to Rs 105 crore for the quarter ended December 31, helped by its wireless segment.

The firm's total income rose 2% to R5,136 crore from R5,031 crore in the quarter ended September 30. The company, the third-largest telephone carrier by subscribers, posted a 43% drop in quarterly profit on a year-on-year basis.

Profit at the company's global enterprise business fell 9% to R262 crore, while profit at its wireless segment rose 3.7% to R663 crore. RCom's revenue per minute stood at 44 paise, from 43 paise in the preceding quarter. The company's wireless segment has benefited from higher tariffs during the quarter. RCom raised prepaid tariffs by 25% across its GSM and CDMA platforms in September.

Over the past three years, telecom players have not maintained an increase in tariff due to intense price competition. Companies such as market leader Bharti Airtel and Idea Cellular are now cutting promotion offers, and even raising tariffs in certain circles to offset low revenue and high costs. Analysts at Motilal Oswal said the RCom management has outlined plans for reduction in network costs by 10-12% and lowering subscriber acquisition/employee costs.

The company is looking to reduce network costs, apart from subscriber acquisition and employee costs.

RCom, which is saddled with a debt of R36,329 crore as on December 31, had planned the sale of its telecom tower unit Reliance Infratel but that has dragged on for nearly two years. Last year, Ambani said the company is in advanced stages of negotiations with a number of consortia that have expressed great interest in this very valuable asset (tower business). But the deal never came through.

What made matters worse was the Singapore initial public offering by its undersea cable unit had to be shelved due to harsh market conditions. This offering could have helped the company raise up to $1 billion. On a year-on-year basis, wireless minutes was 103 billion, up 3.1%. RCom shares closed flat at R88.10 on Wednesday on the Bombay Stock Exchange. They have gained 42% in value in the last six months.