New Delhi: Reliance Communications Ltd (RCom), India’s second biggest mobile phone services firm, beat analyst expectations and posted a 138% year-on-year jump in net profit to Rs1,221 crore in the first quarter, partly boosted by a Rs127 crore financial income. The company’s revenues rose 32% to Rs4,304 crore.
Compared with the March quarter, revenues in the April-June period, which included an unattributed “other income” of Rs56 crore, were up 9.3%, and profits were higher by nearly a fifth, thanks to a relatively lower growth in the company’s expenses.
With the June quarter numbers, RCom has caught up with bigger rival Bharti Airtel Ltd on key profitability measures such as Ebitda margins. The Ebitda (short for earnings before interest, taxes, depreciation and amortization) margin, which indicates the degree of profitability of operations, rose to 42.16%—for the first time overtaking that of Bharti Airtel. The GSM operator had seen its Ebitda margin slip to 41.4% in the June quarter due to cost increases.
Last week, Bharti Airtel had to be content with announcing a Rs159 crore quarter-on-quarter increase in its net profits, despite getting a net inflow of nearly Rs192 crore from its financing activities. RCom was expected to post a profit of Rs1,050 crore and sales of Rs4,270 crore, according to the median estimates of nine analysts surveyed by Bloomberg.
Analysts pointed out that the sustainability of the improved margin depended on the nature of the Rs56 crore the company has added as “other income” to its revenues. “Since it is not clear where the income has come from, what the costs associated with generating it are and how sustainable it is, it will be difficult to say whether it is an actual improvement or not,” said Harit Shah, telecom analyst with Mumbai-based Angel Broking.
RCom, which added 3.6 million wireless subscribers in the June quarter, had to log off nearly 5.6 million connections on 1 April after a government directive on undocumented users. The company has seen its wireless subscriber numbers drop from around 30 million to around 28 million by the end of June. S.P. Shukla, the head of the phone firm’s wireless division, told analysts on a conference call that the company’s revenue per minute, indicating the general level of tariffs, had moved up from 70 paise to 74 paise as it cut down on the practice of bundling talktime with handsets. However, it also seemed to have impacted usage because average minutes of usage shrunk from around 540 minutes a month to 510 minutes over the quarter, he said.
Shailendra Bhatnagar and Chitra Somayaji of Bloomberg contributed to this story.