Mumbai: Reliance Communications Ltd (R-Com), the mobile telephony arm of the Anil Ambani-led Reliance Group, posted a 26% sequential decline in net profit to Rs 186.20 crore for the quarter ended 31 December.
The company’s revenue in the same period remained almost unchanged at Rs 5,052.10 crore, up 0.23% quarter-on-quarter (q-o-q). Its operating profit margin in the same period also rose marginally by 10 basis points to 31.9%. A basis point is 0.01 percentage point.
In a conference call with analysts after announcing earnings, Punit Garg, president of R-Com’s global enterprise business unit, said that “subdued competitive intensity” and “abating competitive pressures” in the Indian telecom sector were a “welcome development that would help in achieving stability and improve revenues”.
On a year-on-year basis, R-Com’s net profit fell for the 10th quarter in a row and represented a 61% decline.
The firm also missed earnings estimate. Bloomberg had pegged profit at Rs 209.58 crore and net sales at Rs 5,105.10 crore.
R-Com dropped 1.16% on BSE on Friday to Rs 93.95. The benchmark Sensex lost 0.46% on the same day.
Over the last one year, R-Com’s shares have declined 2.69%, while the Sensex has gained 1.64%.
R-Com also saw marginal q-o-q declines on two important operational parameters. While average revenue per user from the wireless business fell to Rs 100 from Rs 101 in the preceding quarter, minutes of usage per subscriber came down to Rs 224 from Rs 227 in the September quarter.
The revenue per minute earned by R-Com on its network, however, remained unchanged at 45 paise.
The company pointed out in its statement that revenue per minute and operating profit margin were among the highest in the industry, and stable.
Net debt rose 15% sequentially to Rs 36,762.70 crore. The high level of debt has been a cause of concern for the company over the last few quarters.
“The company is targeting significant debt reduction by March 2013,”Garg said during the analyst call.
Pending a proposed deal to sell its telecom tower assets to another investor, debt remains high.
A deal to sell the towers to GTL Infrastructure collapsed in September 2010. The firm has been scouting for another investor ever since, and said, while announcing its September quarter results, that some investors were in the process of conducting due diligence.
On 17 January, R-Com announced it had tied up $1.18 billion of foreign debt from a consortium of Chinese banks to refinance the redemption of foreign currency convertible bonds issued by the company, due on 1 March.
In an earnings preview report by Edelweiss Securities Ltd dated 5 January, revenue growth for telecom firms such as Bharti Airtel Ltd and R-Com were estimated to be “modest” due to “subdued subscriber addition” in the third quarter of fiscal 2012.
The Edelweiss report had also forecast a marginal increase in the company’s operating profit margin due to increased contribution of data services to revenue per minute earned by the company.
One of the key strategies for future growth outlined by Garg during R-Com’s analyst call was reviving the firm’s CDMA business.
CDMA is a telecommunications technology that R-Com initially used to roll out telephony services in India in 2002.
Though R-Com continues to offer CDMA services, it launched services based on GSM, another telecommunication technology used widely in India, in 2008 and the latter has contributed significantly to the company’s growth.
Reuters contributed to this story.