RCom net slides 21.4%

Revenue down 9%, but minutes of usage 23% higher

Reliance Communications (RCom), the third-largest telecommunications company in the country, posted a 21.4 per cent decline in net profit for the third quarter ended December 31, 2009, at Rs 1,108 crore, compared with Rs 1,410 crore in the same quarter the previous financial year.

Revenue fell 9 per cent to Rs 5,310 crore, from Rs 5,849 crore in the same quarter the previous year. Minutes of usage went up by 23.4 per cent, the company said in a statement today.

RCom is not the only company that posted muted earnings in the quarter. The largest telecom player in the country, Bharti Airtel, posted a 2 per cent increase in profit after tax (PAT), while Idea Cellular’s net profit went down by 22.5 per cent year on year..

Pricing pressures
Telecom companies’ earnings had come under huge pressure in recent months due to a price war that had reduced revenues. Tata DOCOMO, which entered the market in August last year, introduced the 1-paise-per-second tariff plan that changed the rules of the game.

Many telecom companies had to follow suit by reducing their tariffs. Reliance Communications itself introduced two new plans during the quarter, called ‘Simply Reliance’, in three variants — 50 paise per minute, 1-paise-per-second and Re 1 per 3 minutes. They also came up with new SMS plans, which included 1-paisa per SMS and unlimited SMSes for Re 1 a day.

On a sequential basis, RCom’s PAT went up 49.7 per cent in the reporting quarter compared with the preceding one. Revenues, however, fell 7 per cent. The earnings before interest, depreciation, taxes and amortisation margin fell 1.3 per cent on a quarter-on-quarter basis.

“As an integrated and converged telecommunications service provider, we are better placed to withstand the present highly competitive environment. Despite the sharp fall in tariffs, we have demonstrated stability in wireless revenues and margins and are confident to emerge even stronger in the future,” Chairman Anil Ambani said in a press release.