RCom net profit slips 56%

To partly exit low-margin PCO wholesale, wireless segments.

Reliance Communications on Monday posted a 56.6 per cent decline in net profit to Rs 480 crore, compared to Rs 1,108 crore in the corresponding quarter last year. Its revenues slipped by six per cent to Rs 5,004 crore from Rs 5,309 crore.

RCom’s margins for the quarter stood at 33.3 per cent, compared to 34.1 per cent in the same quarter last year. It also has a net debt of Rs 32,000 crore at the end of the third quarter.

The company said it was planning to re-balance its portfolio and exit from low-margin business in both wireless and wireline segments. It has already been reducing free minutes in its wireless business and now plans to move away from the wholesale PCO business.

The company said the wholesale PCO business was typically a low-margin segment where wholesale minutes are provided to distributors at a bulk discount. “We want to release spectrum and capacities and concentrate on more profitable data business like high-speed Internet. We already provide this service across 500 towns and plan to extend it to 650 to 700 towns.

RCom which was also implementing a similar strategy in its wireless business has reduced free minutes it used to offer by 50 per cent over the last two quarters. The move, the company said, has helped them retain margins on a quarterly basis at 29 per cent this quarter, compared to 28.9 per cent in the last quarter.

However, the process would take take nearly five quarters to see results. Before they implemented the strategy, the company’s revenues per minute (RPM) was 8-10 paisa lower than the industry average. Now it has risen to 44 paise per minute.

The company’s customer base however went up by 34 per cent on year-on-year to 126 million from 94 million in the same quarter last year.

Reliance Communications, which has launched 3G services in Mumbai, Kolkata and Chandigarh, plans to launch services in all the 13 circles where it holds spectrum by March end.

The company’s shares traded flat on Monday going up by 0.2 per cent to close at Rs 97.4 per share on the Bombay Stock Exchange.