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RCom beats peers, thanks to lower base

RCom beats peers, thanks to lower base
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First Published: Sun, Nov 14 2010. 04 59 PM IST
Updated: Sun, Nov 14 2010. 04 59 PM IST
Like its peers, Reliance Communications Ltd (RCom) reported lacklustre results for the quarter ended September. Revenue grew by 0.2% quarter-on-quarter to Rs 5,118 crore and earnings before interest, tax, depreciation and amortization (Ebitda) rose 1.7% to Rs 1,660 crore. The revenue of its wireless business, which account for more than 80% of total revenue, rose by 0.2% and the segment’s Ebitda increased by 0.9%.
Earlier last week, Bharti Airtel Ltd had reported a 0.2% sequential decline in revenue for its India and South Asia mobile services business and a 2.4% decline in Ebitda. Idea Cellular Ltd reported a 0.1% increase in consolidated revenue and a 1.1% sequential decline in Ebitda. It seems as if RCom has beaten its peers this time around. But note that its performance comes after a prolonged period of underperformance, and in any case it hasn’t beaten its competitors by much in the September quarter. In the June quarter, RCom had grown wireless revenue by 1.5%, at a time when Bharti and Idea had reported a 6.1% and 4.2% growth, respectively. While the firm’s competitors had grown the total traffic carried on their respective networks at double digits, RCom had reported a mere 1% increase.
In the September quarter, the total number of minutes carried on RCom’s network rose by 0.2%, in line with the growth reported by Bharti, and lower than the 3.1% growth reported by Idea. The industry’s performance was affected last quarter owing to a seasonal impact—usage is generally marginally lower during the monsoon. There’s nothing much to write home about the company’s remaining businesses. RCom’s long distance, data and enterprise services businesses grew revenue and profit by 1.4% and 2.3%, respectively. After two quarters of declining profit, any hopes of a bounce-back in profit remain elusive. For the past two quarters, however, the losses in the “others” segment which houses the DTH (direct-to-home) business, retailing (Reliance World), and unallocated corporate expenses has been contained.
What’s more important, from an investor’s perspective, are the company’s plans to monetize its assets and/or raise funds by selling a stake in the company. With net debt at more than Rs 28,000 crore and amounting to more than four times annualized Ebitda for the first six months of this year, it’s imperative that the company reduces its debt burden. Unfortunately, there haven’t been any positive developments on this front—in fact, last quarter, the firm’s tower deal with GTL Infrastructure Ltd fell through. RCom shares, however, have been more or less flat this year despite setbacks on the fund-raising front. They have even performed better than shares of Bharti, which have fallen by around 8% year-till-date.
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First Published: Sun, Nov 14 2010. 04 59 PM IST