RCOM net profit tumbles as tariff war takes hold

2 Feb 2010

Indian mobile network operator Reliance Communications (RCOM) has released its financial results for the three months ended 31 December 2009, posting a lower than expected drop in quarterly net profit. According to the telco, three-month net profit came in at INR11.077 billion (USD239 million), down 21% against the INR14.1 billion it reported for the same period a year earlier. The drop was attributed to a significant decline in call charges on the back of a tariff war that has enveloped the Indian wireless sector, although the drop was offset by lower costs and foreign exchange gains. Revenue for the operator’s third financial quarter also slumped as a result of heightened competition, with RCOM posting sales of INR53.098 billion, a 9.2% year-on-year decline from INR58.5 billion, while earnings before interest, tax, depreciation and amortisation (EBITDA) were 22.9% lower than the corresponding period in 2008 at INR18.126 billion.

While competition has impacted RCOM’s financial results, in terms of subscribers the operator has continued to grow apace, reporting that as at end-December 2009 it had a customer base totalling 93.79 million, up more than 50% against the 61.35 million it reported one year before. Pre-paid customers continue to dominate the telco’s user base, with RCOM reporting that 95% of all users were on pre-paid tariffs at end-2009. Although customer numbers once again surged, as a result of tariff cuts ARPU fell from INR161 to INR149. Broadband subscribers meanwhile rose to 1.455 million, up just 1.1% quarter-on-quarter, and 8.9% year-on-year.

India, Reliance Communications (RCOM)