Poor Show by Reliance Communication – 51% dip in quarterly profit and more woes
By Manoj Govindassamy on 5 November, 2009, 12:44 am
Reliance Communications’s quarterly (Q2FY10) results are out. RCOM, India’s second largest telecom service provider reported a topline of Rs.5496.3 crores. Net profit reported was Rs.740 crores, compared to Rs 1,531 crore in the year-ago period. So, a whopping 51% decline in net profit.
On the counterpart, Bharti Airtel, the nation’s largest telecom service provider, reprted a 13% rise in net profit and 9% revenue growth for the same quarter.
Reliance Communication’s key performance indicators exhibited a discouraging trend as well. The ARPU (Average Revenue Per User) for the quarter for RCOM fell by 23.3% to Rs 161, while the same has fallen by 9.4% for Bharti Airtel and 9.9% for Idea Cellular. MoU (Minutes of Usage) and ARPM (Average Revenue Per Minute) have fallen by 6.8% and 19.0%, respectively, over the last quarter. The decline in key indicators is not as steep for both Bharti Airtel and Idea Cellular, where MoU and ARPM have declined by 5.9% and 3.7%, respectively, for Airtel and 6.0% and 3.4%, respectively, for Idea.
The MoU fell from 365 in the last quarter to 340 in Q2FY10. The ARPM declined drastically from Rs 0.58 per minute to Rs 0.47 in Q2FY10.
While the company has been able to add a huge number of subscribers by offering attractive offers and free minutes, it has been unable to put a check on subscriber quality. The company keeps on adding low revenue clients, resulting in a steeper decline in ARPU than the industry.The subscriber market share for Reliance Communication at the end of Q1FY10 stood at 18.9% while the revenue share was just 11.0%. — source icici direct research
The telecom companies which looked very attractive for the share holders/traders has lost its shine now. Already India is boasting of having the lowest telecom tariffs in the world (yeah, its the truth. its around 2 cents ) and telecom tariffs are expected to go down further.
Recently IT and Telecom minister A.Raja announced that Local call tariffs @ 10 paisa per minute and STD calls @ 25 paisa per minute are achievable in near future. Mean, telecom companies are going to see more subscribers but not the revenue and so their valuations will degrade quite steeply. And in particular, Reliance Communications which already seeing steep fall in ARPU will get more blow in the near future.
what a drag, i wanted this one, went to get it this morning, and nada – it’s the best looking of any of them! i’m holding off on my kindle 2 purchase until we hear more on if its coming back.
[...] said, RCOM is feeling the heat for sure and Tata Teleservices is racing up in the Indian Telecom Market. Don’t forget to [...]
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