Reliance Communications Net Profit Up 17% To Rs 1,531 Crore

[Arun 795]

Economic Times

1 Nov, 2008, 0029 hrs IST

Reliance Communications (RCOM) has posted a 17.3% growth in net profit in the July-September quarter, beating estimates, due to higher number

of customers. Its consolidated net profit grew to Rs 1,531 crore in the second quarter of the current year as over 5.2 million users signed up for services during the period.

The Anil Dhirubhai Ambani Group (ADAG) company saw 23.3% rise in revenue to Rs 5,645 crore. Of this, Rs 4,119 crore (65%) came from wireless business, which includes both GSM and CDMA services. Its global business, comprising national and international long distance voice, video and data services, contributed Rs 1,526 crore or 24% to total revenues.

“The GSM rollout (in remaining 14 circles) is on schedule and despite the liquidity crunch in the financial markets, the funding requirement is fully in place,” RCOM chairman Anil Ambani said at the earnings conference call after the results.

The RCOM stock gained 13.7% to close at Rs 220 on BSE on Friday.

RCOM president-wireless SP Shukla said: “There will be rise in revenues from additional subscribers which will reflect as soon as we launch GSM.” The commercial launch will be in December with a target to complete rollout in all the 14 circles by the mid-2009"

RCOM’s total EBITDA moved up over 17% to Rs 2,302 crore, with EBITDA margin standing at 40.8%. However, the company’s wireless EBITDA margin has declined for the second straight quarter. “This is a cause of concern,” said an analyst. Wireless EBITDA was 38.9% during the reporting quarter as against 40.4% in the April-June 2008 period. Average revenue per user per month (ARPU) was also down to Rs 271 compared to Rs 282 last quarter.

The telco invested Rs 4,773 crore for network expansion during the quarter, it said in a statement on Friday. RCOM expects its capex to start declining beginning next year as most of its projects have already reached the execution stage.

The company hopes to benefit from department of telecom’s decision to reduce the contribution of opertors to Universal Service Obligation Fund (USOF) by 2%. “We are confident of achieving the laid down criteria to get 2% USOF reduction when it becomes applicable and it will translate into margin increase,” said Mr Shukla. The reduction is scheduled to come into effect from April next year. It has set up 25,000 towers in the past 15 months and is targeting to end the fiscal with a portfolio of 48,000 towers.

However, RCOM has not yet signed any sharing agreements with other operators. “We are in advanced talks with multiple operators,” said a company official, adding that the current internal tenancy ratio per tower is 1.3. “We expect strong growth across segments, with margin expansion of 2% in each of the next two quarters. New revenue will flow in high margin services like IPLC and VPN...WiMax services will rollout in the quarters to come,” said Punit Garg, CEO, Reliance Globacom, RCOM’s subsidiary for international operations.

The company’s broadband business added Rs 560 crore to the total revenue. It has set up new data centres in Chennai and Mumbai during the reporting quarter.

RCOM launched its direct-to-home services under the BIG TV brand in August. Its revenues have been reported under the head ‘other income’ and will be shown separately from the next fiscal. Other income, which also includes earnings from webworld services and RCOM’s subsidiaries, was Rs 234 crore during the quarter, said an official during the earnings call.