* Q1 net profit at 1.62 bln rupees vs 1.71 bln estimate
* Revenue growth of 8 percent higher than expected
* Heavy debt load, market competition pose challenges
By Devidutta Tripathy
NEW DELHI, Aug 11 Indian telecoms carrier
Reliance Communications on Saturday reported a
smaller-than-expected 3 percent rise in quarterly profit,
weighed down by higher finance costs, in what was its second
straight quarter of profit growth.
India's No.2 mobile phone operator by customers is battling
a fiercely competitive market of more than a dozen players where
a sharp fall in voice call prices and high payouts for 3G
airwaves have pressured margins.
The company, controlled by billionaire Anil Ambani, is also
saddled with about $7 billion of net debt as of March, and has
so far been unsuccessful in its efforts to raise funds through
stake sales in its units.
Gurdeep Singh, who was named chief executive officer of
Reliance Communications' mobile business in May this year,
described the current market condition as a "tough competitive
environment", but was hopeful of growth in mobile data that
offers relatively higher margin than voice.
"It's a 13-player market, so competitive intensity is
severe. And we'll continue to see this in the near term," Singh
told Reuters in a phone interview after the earnings
A court order to revoke mobile phone spectrum licenses
granted in a scandal-tainted 2008 sale to eight of Reliance
Communications' rivals is expected to ease competition. The
permits will be revoked after an airwave auction is held towards
the end of the year, which will be the last chance for the
affected carriers to win those back.
Reliance Communications said consolidated net profit rose 3.2
percent to 1.62 billion rupees ($29 million) for its fiscal
first quarter ended June, from 1.57 billion a year earlier.
Revenue rose an annual 8 percent to 53.19 billion rupees.
Analysts had expected net profit of 1.71 billion rupees on
revenue of 51.49 billion, according to Thomson Reuters I/B/E/S,
for the company that had about 155 million mobile customers at
Reliance Communications, which ranks No.4 in the industry by
revenue, had posted 10 straight quarters of declining profit
before reporting a surprise profit rise in the March quarter.
While a planned sale of Reliance Communications' telecoms
tower unit, expected to raise about $3 billion, has dragged on
for almost two years, last month it shelved an up to $1 billion
Singapore IPO of its undersea cable unit, dealing a blow to its
efforts to ease its heavy debt load.
Finance charges, which include interest expenses, rose more
than a third in the quarter to 5.53 billion rupees from a year
earlier. The operating (EBITDA) margin for the quarter was at 31
percent, lower than 32.4 percent a year earlier.
Reliance Communications shares, which give the company a
market capitalisation of about $2 billion, closed 0.4 percent
lower at 54.70 rupees on Friday. The stock had hit an all-time
low of 53.40 rupees late last month and is down about 22 percent
on the year, underperforming a broader market up about
By comparison, shares in Indian mobile market leader Bharti
Airtel, which reported this week its 10th straight
quarter of profit decline, are down more than a quarter this
year. Idea Cellular shares have lost about a tenth of