UPDATE 1-India's Reliance Communications Q3 misses estimates

Fri Feb 7, 2014 11:23am EST

* Net profit 1.08 bln rupees vs 2.58 bln rupees estimate
    * Revenue grows 2 pct, lagging estimates
    * Says continues talks for international unit stake sale

 (Adds details, CEO comments)
    By Devidutta Tripathy
    NEW DELHI, Feb 7 (Reuters) - Reliance Communications Ltd
, India's fourth-biggest mobile phone carrier, missed
estimates posting a small rise in quarterly profit on lower than
expected revenue and higher finance costs.
     Consolidated net profit rose about 3 percent to 1.08
billion rupees ($17.3 million) for its fiscal third quarter to
end-December, from 1.05 billion rupees a year earlier, the
company controlled by billionaire Anil Ambani, said on Friday.
    Bigger Indian carriers, including Reliance Communications
have benefited from lower competition and were able to raise
call prices last year after a court order on a widespread
licensing scandal forced some smaller carriers either scale back
or shut down operations.  
    But a heavy debt load has weighed on Reliance
Communications' profitability, and the company has seen little
success in its efforts to cut debt by selling assets.
    Reliance Communications, which plans to sell a stake in its
international business unit, continues talks with potential
buyers, Gurdeep Singh, chief executive of Reliance
Communications' wireless business said, adding the focus was
more on improving operating margin, than growing revenue.
    "We are very conscious and clear that we are looking at
improving EBITDA margin and EBITDA delivery, and clearly chasing
profitable minutes growth," Singh told Reuters in a phone
interview after results were published.
    Singh said a cut back on discounted, unprofitable voice
minutes led to a fall in call minutes used by customers and  
checked revenue growth in the quarter. Indian carriers receive
more than 80 percent of revenue from voice call services, but
contribution from data services is growing much faster.
    Revenue in the third quarter rose 1.9 percent from a year
earlier to 54.03 billion rupees, lagging estimates. Nine
analysts on average had expected a net profit of 2.58 billion
rupees on revenue of 55.52 billion rupees, according to Thomson
Reuters StarMine.
    Monthly average revenue per user, a key metric for
telecommunication carriers, rose nearly 12 percent on year to
125 rupees in the third quarter, while realisation per minute
rose 5 percent to 0.435 rupees.
    Net finance costs in the quarter were 24 percent higher from
a year earlier at 7.49 billion rupees. Reliance Communications
is the most leveraged among listed Indian mobile carriers with
its net debt of $6.5 billion being more than five times its
annualised operating profit.
    Shares in Reliance Communications, valued at more than $4
billion, closed 1.1 percent lower ahead of the results in a
Mumbai market that gained 0.5 percent.  
($1 = 62.5225 Indian rupees)

 (Reporting by Devidutta Tripathy; Editing by Subhranshu Sahu
and Sofina Mirza-Reid)
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