India’s second largest telecom operator, Reliance Communications (RComm) posted a net profit of Rs 1,512 crore for the first quarter, up 23.9% compared to Rs 1,220 crore in the quarter of FY08, but a mere 0.6% rise compared to Rs 1,502 crore on a quarter-on-quarter (Q-o-Q) basis. The company posted revenues of Rs 5,322 crore for the first quarter, up by 23.7% from Rs 4,304 crore in Q1 of FY08, but only 0.2% higher from Rs 5,311 crore on a Q-o-Q basis.
The firm missed the median estimate of about Rs 1,550 core expected by various analysts. Last week, Bharti Airtel had beaten analysts’ estimates by reporting a 34% increase in profits year-on-year for the first quarter at Rs 2,025 crore.
Anil Dhirubhai Ambani, chairman, RComm, said, “The company will be investing an aggregate of Rs 40,000-50,000 crore between FY2008 and FY2009, the full benefits of which will flow through the next year onwards, leading to significant acceleration in earnings growth.”
The RComm stock was down marginally to close at Rs 500.05 on the Bombay Stock Exchange on Thursday.
The company took a beating on account of a drop in PCO revenues and STD tariffs during this quarter. The acquisition of global managed network services provider VANCO Group for $325 million and Wimax operator, eWave World under its subsidiary, Reliance Globalcom also impacted the quarter results. The revenues for the wireless network came down by 1.5% to Rs 3,128 crore from Rs 3,175.7 crore in the last quarter. The Wireless ARPU for the quarter came down by 11% to Rs 282 per subscriber from Rs 317 per subscriber in the last quarter.
SP Shukla, president-personal business, RComm, in an analysts’ conference call said, “The ARPUs have gone down due to the one time STD tariff decline, while the usage has gone up. The RPM (revenues per minute) is 0.66 paise, better than most industry counterparts. A larger expansion of PCOs will be happening in the rural areas and as the revenues from the mobility business start growing, we will see a stable revenue growth in the coming quarters.” Punit Garg, CEO, Reliance Globalcom, said, “We expect revenues to start coming in from the following quarters from our acquisitions in this quarter. We expect each contract to value between $100-130 million for Virtual Private Network and Ethernet services.”
The company reiterated its plans to launch GSM operations by the end of this year and conclude by the mid of the next year. It will also offer 3G services on both GSM and CDMA. Reliance Communications’ current subscriber base stands at 51 million, of which 43 million are CDMA and the rest 8 million, GSM subscribers. During the analyst call, the company maintained that the acquisition of South Africa’s MTN was a large opportunity that it examined and it will continue to look for opportunities to grow.