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Rcom Net Plummets 86% on Higher Interest Costs

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RCOM Net Plummets 86% on Higher Interest Costs

Reliance Communications, the country's second-largest telecoms company by subscribers, missed street forecasts to post a bigger than expected 86% decline in quarterly profits, its seventh straight fall, despite call tariffs in the country stabilizing over the last 12 months.

RCOM's results are a pointer that 3G launch costs and interest payouts for thousands of crores in loans will continue to squeeze its profits and margins, and also that of the industry for the considerable future.

The company's debt stood at 32,048 crore for the year ended March 2011.

The telco's net profit fell to 169 crore for the three months ended March 2011, compared to 1,220 crore for the corresponding period last year.

But sales were up 55% at . 7,876 crore during this period against. 5,092.8 crore for the three months ended March 10. Earnings before interest, tax, depreciation and amortization (EBIDTA) jumped significantly to Rs 4,122 crore in fiscal 2011 from . 1,602 crore in the previous year.

Reliance's primary competitor, Bharti Airtel, had posted a 31% drop in fourth-quarter profits, weighed down by its loss-making African operations. Bharti's income for the three months to end-March fell to . 1,401 core compared with . 2,044 crore in the year-ago period. Excluding its Africa business, Bharti's profits from India and South Asia fell 15%.

RCOM's average revenue per user fell 23% over the last 12 months to . 107. In comparison, Airtel's ARPU, which declined 12% during the same period was at . 194 as of March 2011-end. For the full year, RCOM's net profit fell 71% to Rs 1,346 crore from Rs 4,655 crore.

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