Shares of Reliance Communications Ltd (RCom) were among the biggest gainers in the markets on Tuesday, rising by around 4% even while the Nifty index of the National Stock Exchange rose by just 0.5%.

The company announced results for the quarter ended December after the markets closed on Monday, but its financial performance does not warrant such a reaction.

Revenue fell by 2.2% sequentially and Ebitda (earnings before interest, tax, depreciation and amortization) was flat at September quarter levels. Ebitda of the core wireless business fell by 2.6% sequentially, at a time when competitors such as Bharti Airtel Ltd, Vodafone Essar Ltd and Idea Cellular Ltd reported an increase in profit from their wireless businesses.

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RCom’s total minutes of usage have continued to decline compared with competitors, who have been growing customer usage on their mobile networks. Last quarter, total minutes ofusage fell by 3.3% compared with a rise of 4.4% for Bharti, 5.5% for Vodafone and 10.2% for Idea.

The disparity in growth rates is even more stark on a year-on-year (y-o-y) basis. RCom’s total minutes of usage on its wireless network has risen by less than 3% on a y-o-y basis, while for Bharti, Vodafone and Idea, it has risen by 30%, 33% and 62%, respectively.

According to RCom’s management, the lower growth is explained by a rationalization of free minutes on its network and the restructuring of its low-margin PCO (public call office) business. This ties in with the fact that the company’s average revenue per minute (RPM) of usage has been intact at 44-45 paise in the past five quarters, while competitors have witnessed a sharp decline in RPM.

Even so, the company’s wireless Ebitda has declined y-o-y, while other wireless operators have managed an increase in profits.

Another negative from the results was that the company’s net debt increased further to 32,447 crore. Based on its past 12-month Ebitda, RCom has a net debt to Ebitda ratio of a high 4.9 times.

Given these risks and the company’s relatively weak operational performance, it’s no wonder RCom’s shares have underperformed the market and its peers by a large margin.

Graphic by Ahmed Raza Khan/Mint