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Reliance Communications profit doubles as customer base climbs

Reliance Communications profit doubles as customer base climbs
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First Published: Tue, May 01 2007. 12 16 AM IST
Updated: Tue, May 01 2007. 12 16 AM IST
New Delhi: The Reliance Communications Ltd (RCL) stock surged 4.15% in a declining market after the company announced a 154% jump in its fourth quarter profits to Rs1,024 crore, on the back of growing customer base in the world’s fastest growing wireless market. The company, whose fourth-quarter revenues increased by a third to Rs3,937 crore, also became the first private Indian telecom company to declare a dividend as it announced a 10% payback to investors at the end of its first year as a listed company.
Full-year profits were up 612% at Rs3,163 crore and revenues, at Rs14,468 crore, up 46%. RCL had 28 million mobile telephony subscribers at the end of March. The company added 1.2 million new users in March alone, despite a government mandated security drive paring customer growth. The company disconnected some 5.6 million users who did not submit adequate proof of identity on 1 April. For the year ended March 2007, Reliance Communications had an average revenue of Rs371 per subscriber per month.
RCL also announced ambitious rollout targets, including commitment to a nationwide WiMax network and the expansion of its infrastructure base from 13,000 towers to 33,000 by the end of the year, along with plans to list two new subsidiaries. “We are fully committed to a nationwide rollout of WiMax as soon as the government announces the policy,” said Anil Ambani, chairman, RCL, becoming the first private telecom operator in the country to publicly support WiMax over 3G (third generation networks). Reliance, which will face higher rollout costs for deploying a GSM-based 3G network compared to its rivals due to its CDMA heritage (GSM and CDMA are rival technology platforms for offering mobile services), also said that it would bid in the anticipated scheme by the government’s Universal Services Obligation Fund (USOF) to spread broadband in rural areas using the tower network it is setting up.
“According to our information, there will be one more round of bidding (for putting up new towers under the USOF scheme) for another 8,000 to 10,000 towers and another one for offering wireless broadband (using the pre-existing towers),” said Ambani.
Ambani plans to spend Rs10,000 crore this year extending his company’s network after losing out to Vodafone Group Plc in a battle for control of India’s fourth largest cellular telephony company Hutchison Essar Ltd. Reliance Communications’ larger rival Bharti Airtel Ltd, India’s largest cellular telephony company, plans to spend $3.5 billion (Rs14,350 crore) this year.
“The numbers are looking good but the competition is tough, and the results are reflected in the stock price,” said Viswanathan Vasudevan, who helps manage almost $275 million of Indian stocks at Aquarius Investment Advisors Pte in Singapore. “Hopefully, profit in the coming quarters should be good also because of the growth potential of the sector,” he added. Vasudevan has RCL in his portfolio and rates the stock as “hold”.
Ambani said he expected to unlock more value for shareholders by listing two units, Flag Telecom Ltd, a bandwidth seller, and the tower business. RCL has put all its telecom infrastructure in a separate unit to help sharing of equipment such as towers with rivals such as Hutchison Essar.
“The tower business is expected to fetch about $4billion in the immediate term for shareholders,” said Deven Choksey, chief executive at Mumbai brokerage K.R. Choksey Shares & Securities, which has a “buy” rating on the company’s stock.
Shailendra Bhatnagar and Archana Choudhary of Bloomberg contributed to this story.
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First Published: Tue, May 01 2007. 12 16 AM IST