Indian telecom carrier Reliance Communications reported a smaller-than-expected 3 percent rise in quarterly profit, weighed down by higher finance costs, in what was its second straight quarter of profit growth.
India’s No.2 mobile phone operator by customers is battling a fiercely competitive market of more than a dozen players where a sharp fall in voice call prices and high payouts for 3G airwaves have pressured margins.
The company, controlled by billionaire Anil Ambani, is also saddled with about $7 billion of net debt as of March, and has so far been unsuccessful in its efforts to raise funds through stake sales in its units.
Reuters
Gurdeep Singh, who was named chief executive officer of Reliance Communications’ mobile business in May this year, described the current market condition as a “tough competitive environment”, but was hopeful of growth in mobile data that offers relatively higher margin than voice.
“It’s a 13-player market, so competitive intensity is severe. And we’ll continue to see this in the near term,” Singh said.
A court order to revoke mobile phone spectrum licenses granted in a scandal-tainted 2008 sale to eight of Reliance Communications’ rivals is expected to ease competition. The permits will be revoked after an airwave auction is held towards the end of the year, which will be the last chance for the affected carriers to win those back.
Reliance Communications said consolidated net profit rose 3.2 percent to Rs 162 crore ($29 million) for its fiscal first quarter ended June, from Rs 157 crore a year earlier. Revenue rose an annual 8 percent to Rs 5319 crore .
Analysts had expected net profit of Rs 171 crore on revenue of Rs 5149 crore, according to data for the company that had about 155 million mobile customers at end-June.
Reliance Communications, which ranks No.4 in the industry by revenue, had posted 10 straight quarters of declining profit before reporting a surprise profit rise in the March quarter.
While a planned sale of Reliance Communications’ telecoms tower unit, expected to raise about $3 billion, has dragged on for almost two years, last month it shelved an up to $1 billion Singapore IPO of its undersea cable unit, dealing a blow to its efforts to ease its heavy debt load.
Finance charges, which include interest expenses, rose more than a third in the quarter to Rs 553 crore from a year earlier. The operating (EBITDA) margin for the quarter was at 31 percent, lower than 32.4 percent a year earlier.
Reliance Communications shares, which give the company a market capitalisation of about $2 billion, closed 0.4 percent lower at Rs 54.70 on Friday. The stock had hit an all-time low of 53.40 late last month and is down about 22 percent on the year, underperforming a broader market up about 14 percent.
By comparison, shares in Indian mobile market leader Bharti Airtel, which reported this week its 10th straight quarter of profit decline, are down more than a quarter this year. Idea Cellular shares have lost about a tenth of their value.
Reuters
