Reliance Com profit dips plunges 16%

Nicole McCormick
17 May 2010

Reliance Communications, the second biggest telco, reported a 16% slide in quarterly profit due to an accounting change and continued mobile tariff pressure.

Reliance said Q1 earnings had fallen to 12.2 billion rupee ($270.8 million) on 17% lower revenue of 61.2 billion rupee.

The results beat a Bloomberg analysts’ consensus forecast of an 8.1 billion rupee profit for the quarter.

The quarterly profit would have been boosted by 34.3 billion rupee but RCom is no longer recognizes gains on outstanding derivative contracts.

Full-year earnings fell 23% to 46.6 billion rupee, with revenue down 3.6% to 221.3 billion rupee.

Reliance operates CDMA, GSM, broadband, long distance and global wholesale networks.

Chairman Anil Ambani said the 2009-10 financial year was one of the “most challenging years for the telecom industry.”

But he expected the company should be able to “sustain profitable growth in the coming quarters.”

The tariff war also drove down earnings at rival Bharti, India’s biggest cellco, which reported an 8% fall in profit. Unlike Reliance, it boosted revenue 2.3%, the company said last month.

Since nationwide GSM launches by India’s only two CDMA operators, Reliance and Tata, the CDMA ecosystem has stagnated.

Investment bank CLSA said Reliance ’s new CDMA-service unlimited calling plans should revive the CDMA segment and, together with the firm’s GSM expansion, fuel revenue growth.

Reliance is aiming to expand the company’s share of market revenue from 12% to 20% in three years.

Reliance Communications shares on the Mumbai Stock exchange closed down 1.4% at Rs144.5 on Friday.

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