Infocomm To Suffer Loss

[shuva_nandi 0]

Infocomm sees Rs 233 cr net loss

Sidhartha / New Delhi April 05, 2005

Low average revenue per user & a dwindling subscriber base resulted in the loss.

Reliance Infocomm has projected that it will close 2004-05 with a net loss of Rs 223 crore against the Rs 2,331 crore net profit estimated earlier.

Lower than expected average revenue per user and a subscriber base falling short of projections resulted in the change in the company?s calculations.

The company?s net loss is estimated at Rs 164 crore during April-December 2004, while the net loss at the end of 2003-04 was Rs 390 crore. The company did not respond to a questionnaire e-mailed on Saturday.

A company spokesperson today said the Reliance Infocomm would give a detailed response tomorrow.

In a presentation after its third-quarter results, the Reliance group had said Reliance Infocomm?s operations were "expected to be profitable in the forthcoming quarters".

According to Reliance Infocomm?s projections for 2004-05 to 2007-08, which have been submitted to lenders, the wireless subscriber base is estimated to reach 13.58 million at the end of March 2005, 9.7 per cent lower than the earlier projection of 14.9 million.

The new projection of 1.1 million wireline subscribers is a third of the earlier estimate of 3.46 million.

The company had 11.25 million subscribers at the end of February 2005, of which 11.18 million were wireless subscribers. Reliance Infocomm?s average revenue per user from wireless subscribers is estimated to reach Rs 331 at the end of March, two-thirds of Rs 500 anticipated earlier.

For wireline subscribers, the Rs 650 anticipated average revenue per user at the end of March 2005 is 72 per cent of the original estimate.

As a result, the company?s total revenue projection of Rs 6,760 crore at the end of March 2005 is nearly 47 per cent short of its earlier estimate of Rs 12,705 crore, while gross profit of Rs 1,469 crore is nearly a third of the original forecast of Rs 4,255 crore.

Reliance Infocomm, however, hopes to turn the corner during the current financial year and is projecting a net profit of Rs 1,266 crore, while total revenue is estimated at Rs 4,221 crore.

The average revenue per user is estimated to decrease further to Rs 313 for wireless subscribers and Rs 618 for wireline users. The company has revised its project cost estimates to Rs 24,900 crore at the end of 2004-5, from its estimate of Rs 18,600 crore up to December 2004.

This comes as a major blow to my expectations of RIM. And the impending issue to breaking the Reliance empire means that the steady supply of funds from RIL's petrochem business is going to stop or reduce. I am worried.

Lets hope that the new top management amassed by Anil Ambani does a better job and still keeps the consumers happy by offering all the benefits of Mukesh regime.

Long LIVE the RIM

Shuvabrata

[SexyGurl 0]

I don't know how old this data is ... (source seems to be dated around the time RIC tied up it's $ 750 MM external debt).

Apr-Dec '04 the net loss was Rs 164 crores .. with the Oct-Dec'04 quarterly net loss of Rs. 6 crores. (Jan-Mar'05 are expected to generate a net profit of about Rs. 55 crores).

So, my expectation is net loss for 2003-04 to be about Rs. 100 crores (not Rs. 233 crores).

Their bigger problem is Rs. 15,000 crores of equity which doesn't incur interest costs when calculating net profit >> an economic intereat rate of 5-6% would mean an additional loss of Rs. 750 crores in the last year (over and above the actual net loss reported)

[rakesh5295 0]

Oh my god!! i thought relaince was earnign great with a 1 crore+ customer base. i think relaince must come up with serices like better intrenet , caller tunes etc to earn.

[Arun 795]

The data is latest itself, as found at Rediff.com on April 05, 2005.

[SexyGurl 0]

The data is latest itself, as found at Rediff.com on April 05, 2005.

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It was only posted on April 05, 2005 by Rediff.

The source is the data made available to lenders ... sometime (when / how back !!)

A more reliance data (for 9 months - Apr-Dec'04) is the RIL Quarterly reporting to it's investors, where, RIC, which is a subsidiary, also has due disclosures made to the investors.

(The report is still available on www.ril.com and clearly mentions 164 cr loss (actuals) for Apr-Dec '04)

also ... RIL Annual Report from 2004-05 should be out by 21st April ... so that should give good info on the full year financials of Infocomm

[Basant 0]

To me the reasons of losses ar following:

1. Due to its poor customer service, most high ARPU customers have stayed away from RIM.

2. Its flip/flop policy discourages customers to pay in time.

3. Its network spread is yet small.

4. It has too many employees doing few lil things.

[deepu 0]

To me the reasons of losses ar following:

1. Due to its poor customer service, most high ARPU customers have stayed away from RIM.

2. Its flip/flop policy discourages customers to pay in time.

3. Its network spread is yet small.

4. It has too many employees doing few lil things.

29393[/snapback]

Cannot agree to point number 4. Visit any WW and you will see how crowded they are due to the inadequate number of employees...

You cannot expect a new company to start making profits within 2 years of its starting..

The loss of infocomm primarily was due to its Monsoon Hungama and the Rs. 501 offer!!!

[shuva_nandi 0]

The reason of the losses forwarded by Basant does not make sense to me at all. Here are the points that i would like to raise:

1. RIM customer care can hardly be called poor given the kind of customer service we are used to getting from state-owned enterprises like BSNL. And regarding ARPU, an avg. ARPU of Rs. 330 is more than the Indian Average.

2. Its the same with all operators given TRAI can't stick to a policy for long.

3. After BSNL, RIC has one of the largest spreads of network and its 80000 Km OFC network is unmatched in India.

4. This point is ridiculous. What happens to BSNL then ???

In my opinion, RIC is yet to come out of the RED coz of the huge Capex for their network rollout and the depreciation & interest costs incurred. Lets hope it turns profitable this fiscal.

Shuvabrata

[SexyGurl 0]

In my opinion, RIC is yet to come out of the RED coz of the huge Capex for their network rollout and the depreciation & interest costs incurred. Lets hope it turns profitable this fiscal.

Shuvabrata

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This is exactly what the game in telecom is: Depreciation & Interest.

Operating costs are quitel low compared to revenues:

At 5000 customer care employees, each earning 2 lacs per annum, would be only 100 crore for the whole year !! >>>> Too puny compared to about 5500 crore revenue RIC would earn this year.

As for webworlds ... they are the retail face ... and should be self-sufficient in their own right. (Webworlds keep with them good retail commissions, when they sell a mobile phone >> something like, if a private franchisee sells the phone, he keeps the retail margin ... A retail margin on a 5000 rupee phone could be as high as Rs. 1000/- ... quite a loot for retail shops) !!!

But to make the point, RIC is not too affected by operating costs (of employees), or webworlds .... it just has to bother about the depreciation & Interest.

Telecom is a capital intensive business. MONEY MATTERS

[Arun 795]

TIMES NEWS NETWORK [THURSDAY, APRIL 07, 2005 12:41:30 AM] - Mumbai

Saddled with huge bad debts, Reliance Infocomm has decided to disconnect 9.3 lakh post-paid customers across the country, sources familiar with the development said.

The drastic step to cut off nearly 10 per cent of its subscriber base of 1.1 crore is the result of an exercise in recent months to strictly enforce customer credit-worthiness and subscriber data verification parameters, the sources said.

The company has sought to clean up its "credit-unworthy" base once and for all in the new financial year. However, a Reliance Infocomm spokesperson has declined to comment.

The company will now upgrade or downgrade the credit-worthiness of a customer based on payment schedule. Asked how the mobile instrument would be retrieved, sources said the company has appointed a battery of lawyers to fight its case.

Explaining the rationale, sources said, "This is a standard practice followed by telecom operators the world over. For several months now, the company has been reviewing its credit policy for customers and has decided to part ways with the chronic defaulters.

"Reliance Info has also instituted very stringent address verification norms before new connections are issued, sources added.

Last year, the company had hired close to 200 lawyers to crack down on defaulters whose bills have been pending for more than a year.

The telecom provider stunned its rivals by notching up a subscriber base of 50 lakh in a year after it launched its operations in May 2003 with various schemes, including a mobile connection by paying a down payment of Rs 501 (known as Monsoon Hungama), which was later recalled due to problems in the manual billing programme.

[city02 63]

At 5000 customer care employees, each earning 2 lacs per annum, would be only 100 crore for the whole year !! >>>> Too puny compared to about 5500 crore revenue RIC would earn this year.

but RIC had over 20-21 K employees as of last year and is expected to cross 25-26 K by the end of this year.

Since it includes top mgmt, the avg would be higher at around 3-4 L each.

This drives up the total to about 800-900 Cr and rising...

[deepu 0]

That may also include low paid employees who lay down cable and do all such stuff!!

[Arun 795]

They are not direct employees of Reliance, but they belong to third party firms that are hired to do the laying of cables.

[Arun 795]

India's CDMA mobile users fall in March

Fri April 8, 2005 10:31 AM GMT+05:30

NEW DELHI (Reuters)

The number of mobile services customers using Code Division Multiple Access (CDMA) platform fell 4.7 percent in March after top operator Reliance Infocomm removed more than 800,000 subscribers who had defaulted.

The user base of CDMA operators dropped to 10.5 million customers in the past month, from 11.02 million in February, the association of CDMA operators said late on Thursday.

Overall, including mobile services based on the rival Global System for Mobile Communication, or GSM, platform, India's mobile user base stood at 51.45 million customers at the end of March, compared with about 52 million in February.

The fall in CDMA users was because Reliance Infocomm had cut 823,324 mobile user accounts because they failed to pay their bills and their addresses could not be reached, the association said.

Data showed Reliance Infocomm, 45 percent owned by petrochemicals giant Reliance Industries Ltd., also added 289,111 new customers in March, taking its total to 9.33 million.

Second-ranked Tata Teleservices reported a net addition of just 10,415 CDMA mobile users, swelling its user base to 1.089 million.

Both Reliance and Tata also compete furiously with 9 GSM-based players such as Bharti Tele-Ventures Ltd. and Hutchison Max Telecom Ltd.

State-run carriers Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd. do not report monthly CDMA numbers, but analysts estimate both firms collectively have more than a million CDMA mobile users.

GSM carriers, who control more than three-fourths of the fast expanding market, had 39.78 million customers at the end of February, and they are expected to report new additions in March later on Friday.

India is home to the world's fastest growing mobile market as cut-rate tariffs of as low as 2 to 3 U.S. cents are attracting new users in the sector that is widely forecast to cross 80 million by December.

[Saurav 22]

That may also include low paid employees who lay down cable and do all such stuff!!

29525[/snapback]

even Reliance has got various companies of Reliance group to hire and get work done. Like NIS SPARTA and Smartinfo solns.

[abhay 0]

TIMES NEWS NETWORK [THURSDAY, APRIL 07, 2005 12:41:30 AM] - Mumbai

Saddled with huge bad debts, Reliance Infocomm has decided to disconnect 9.3 lakh post-paid customers across the country, sources familiar with the development said.

The drastic step to cut off nearly 10 per cent of its subscriber base of 1.1 crore is the result of an exercise in recent months to strictly enforce customer credit-worthiness and subscriber data verification parameters, the sources said.

The company has sought to clean up its "credit-unworthy" base once and for all in the new financial year. However, a Reliance Infocomm spokesperson has declined to comment.

The company will now upgrade or downgrade the credit-worthiness of a customer based on payment schedule. Asked how the mobile instrument would be retrieved, sources said the company has appointed a battery of lawyers to fight its case.

Explaining the rationale, sources said, "This is a standard practice followed by telecom operators the world over. For several months now, the company has been reviewing its credit policy for customers and has decided to part ways with the chronic defaulters.

"Reliance Info has also instituted very stringent address verification norms before new connections are issued, sources added.

Last year, the company had hired close to 200 lawyers to crack down on defaulters whose bills have been pending for more than a year.

The telecom provider stunned its rivals by notching up a subscriber base of 50 lakh in a year after it launched its operations in May 2003 with various schemes, including a mobile connection by paying a down payment of Rs 501 (known as Monsoon Hungama), which was later recalled due to problems in the manual billing programme.

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A EXELLENT MOVE @ a very very very STUPID TIME!!! foxed yeah i'll explain

when reliance has to boost about its the 2nd largest network in india after bsnl which is better than its most feirce compititor BHARTI telecom its cuts down its user base by almost 10% (1m). its by far gonna affect the coustomers who were thinking to take reliance rs 700 /month scheme unlimited std to (10 m) reliance users which is now 9m...... this affects user psychology...

the user base graph that goes up now reduces majorly

about other things disscussed here hmmmmmm reliance cc is one of the best in india . if ne1 thinks otherwise check of mtnl and bsnl u'll get the point

[unwantedmails 0]

Loss.. 233Cr.,. I think most of it is because of the FINES that Reliance keeps giving out. Last fine to BSNL was 150cr.

According to me Reliance's 233cr is not all that bad. We have to look at the speed in which they are growing, RIM's Oversears operations, Its OFC network, its FLAG aquisition, Coverage in Thousands of towns and hundereds of Cities, over 10m subscribers. Just 2 Years of Operations.

It is not a Paan Tapri to make profits from day 1. I think they are doing fine.

Our only request will be to reliance would be to do less jhol so they get less FINES from the govt. or atleast this time when you do a jhol please dont get caught.

Regards,

PCO Guy

[Chirag 5]

Well the funda is simple in this country! Do the jhol, bear the brunt, pay the penalty and go scot-free! So y not do the jhol....

[SexyGurl 0]

or atleast this time when you do a jhol please dont get caught.

Regards,

PCO Guy

29722[/snapback]

Sir, the majority of their jhols have not been caught ... and there is a 233 crore loss for RIL shareholders (who own Infocomm) .... but the private swiss bank accounts show huge profits

Off course the big jhols are not meant to be talked about. keep quiet