RCOM net profit slumps 85% in 1Q 2010

16 Aug 2010

India’s second largest mobile operator by subscribers, Reliance Communications (RCOM), has announced its financial results for the three months ended 30 June 2010, with the company revealing an 85% year-on-year decline in net profit. With hyper-competition in the wireless sector and higher interest charges highlighted as two contributory factors, in its first quarter of the 2010/11 fiscal year RCOM posted a net profit of INR2.51 billion (USD53.6 million), well below expectations, and down 84.7% compared to the INR16.37 it reported in the same period a year earlier. Revenues meanwhile also declined in the three-month period; despite the operator adding more than 20 million subscribers compared to 1Q 2009, RCOM generated turnover INR51.1 billion in 1Q 2010, down from INR61.5 billion in the same period a year earlier. The drop is in part attributed to cuts to wireless rates in a bid to counter competition from the likes of Uninor and Tata Teleservices, both of which have introduced budget tariffs. As a result, RCOM’s average revenue per user has continued to tumble, and for the three months ended 30 June 2010 it stood at INR130 per month, down from INR210 a year earlier, with average minutes of use also falling, down from 365 per month in 1Q09 to 295 a year later. Earnings before interest, tax, depreciation and amortisation (EBITDA) meanwhile stood at INR16.3 billion in 1Q10, down from INR24.5 billion in the same period last year, representing a 33.5% y-o-y decline.

India, Reliance Communications (RCOM)