UPDATE 2-India's Reliance Comm Q1 net up, still seeking buys

(Adds chairman's comment)

By Devidutta Tripathy

NEW DELHI, July 31 (Reuters) - Reliance Communications (RLCM.BO), India's No. 2 mobile operator, lifted quarterly profit by 23.8 percent, almost meeting expectations and boosted by user growth of nearly 10 percent in the world's fastest-growing wireless market.

The firm's tie-up talks with South Africa's MTN (MTNJ.J) to create a global top 10 telecoms company failed earlier this month but Chairman Anil Ambani said he was still interested in buying attractive local and global players.

"I think that we have the management bandwidth, and the capacity and the capability of multi-tasking," Ambani said in a conference call amid analyst concern that global acquisitions may divert the company from its local expansion plans.

Reliance Communications, whose customers are mainly on a CDMA network, is spending $6 billion in the year to March 2009, mostly to expand its fledgling GSM services nationwide to better compete with rivals Bharti Airtel (BRTI.BO) and Vodafone Essar.

Ambani said in a statement the planned extension of GSM networks was "on track" and that he expected a significant acceleration in earnings from the next financial year once it was complete.

Reliance has regulatory approval to take its tower unit public, but turmoil in equity markets has forced firms to defer share issues.

Ambani said the firm was watching volatility in local and global equity markets and would proceed with IPOs of both the tower unit and its global operations when the time was right.

Ambani's fight with his estranged brother, Mukesh, who runs Reliance Industries (RELI.BO), India's largest firm, clouded talks with MTN after Mukesh claimed a right of first refusal for any share sale in the Indian mobile operator.

PROFIT ALMOST IN LINE

Reliance Communications said net profit rose to 15.12 billion rupees ($355 million) for its fiscal first quarter ended June, from 12.21 billion reported in the year-ago quarter.

Revenue rose to 53.22 billion rupees from 43.04 billion.

Analysts expected a net profit of 15.16 billion rupees on revenue of 57.61 billion for the firm, which added 5 million mobile users during the June quarter to have nearly 51 million users at end-June.

The company said long distance tariff cuts effected before the quarter and its public phone services put pressure on margins from the wireless business, which accounts for more than three quarters of total revenue.

EBITDA margin, a key gauge of profitability, was little changed at 42.3 percent.

Last week, larger rival Bharti Airtel reported a forecast-beating 34 percent rise in June quarter profit.

State-run Mahanagar Telephone Nigam Ltd (MTNL.BO) (MTE.N), which provides telecoms services in New Delhi and Mumbai, on Thursday posted a 15-percent rise in quarterly net profit to 1.15 billion rupees.

Cheaper call rates of as low as 1 U.S. cent a minute, handset prices starting at $15 and network expansion by operators to smaller cities and rural areas have fuelled a furious pace of subscriber addition for Indian mobile operators.

More than 8 million subscribers are signing up every month, taking the country's total mobile user base to about 287 million at the end of June, 55 percent higher than a year earlier. Consultancy Gartner expects 737 million users by 2012.

Ahead of the results, shares in Reliance Communications, valued at about $24 billion, closed 0.5 percent down at 500.05 rupees in a Mumbai market that gained 0.5 percent.

The shares, currently trading at about 16 times forward earnings, fell 13 percent between April and June, matching a 14 percent decline in the main Mumbai index. Bharti shares trade at about 17 times forward earnings. ($1=42.6 rupees) (Editing by Mark Williams and David Cowell)