Rate battles shrink RCom net 40%

To focus on high-speed data services.

Reliance Communications, the country’s third-largest telecom operator, today reported a 39.7 per cent drop in net profit for the July-September quarter, as compared to Rs 740 crore in the same quarter last year. Revenue fell 10 per cent to Rs 5,118 crore, as compared to Rs 5,702 crore in the corresponding quarter last year.

Its Ebitda (earnings before interest, taxes, depreciation and amortisation) went down by 18 per cent to Rs 1,660 crore, as compared to Rs 2,019 crore in the same quarter last year. As a consequence of the rate war in the wireless voice business, the Ebitda margins were also lower, at 32.4 per cent as compared to 35.4 per cent in the September quarter of last year.

Quarter to quarter, net profit went up 78 per cent and revenue by 0.2 per cent. “Net profit would have been higher at Rs 1,181 crore, but for the mark-to-market (revaluing assets at current value) gain of Rs 735 crore being used to offset (an) earlier notional forex loss,” said Syed Safawi, president-wireless.

The company’s minutes of usage went up by 12 per cent to 94.6 billion from 84.5 billion in the same quarter last year. Its average revenue per user, however, went down by 27 per cent to Rs 122, as compared to Rs 167 in the previous year’s second quarter.

The change in revenue per minute (RPM), however, was less, at 44 paise per minute for the current quarter, as compared to 47 paise in the corresponding quarter last year. Safawi said the RPM had stood solid at 44 paise for the past three quarters and was a result of its strategy to focus on revenue-earning customers.

“We increased the quality of minutes and had already reduced free minutes by more than 50 per cent. The new offers that we have come up with have more paid minutes and are more prudent, considering that the elasticity of minutes in the market is much less,” he said.

Coming up
RCom is also looking to shift focus to the non-voice, data portfolio. It is planning to launch 3G services in 13 circles where it has secured licences, by the end of the year. In addition, it plans to use its presence in both GSM and CDMA space, to offer high-end data services, and is planning to increase its spread across the country.

“In the next three months, we are getting into huge expansion of high speed internet and 3G. More than 600 towns will have 3G services and around 25,000 towns will have mobile internet,” said Safawi.

The company’s net debt remains at Rs 29,189 crore. It is still looking for buyers for its tower business after a deal with GTL Infra was called off in September. It is also looking to sell 26 per cent stake in the company, both of which might help reduce the debt.