Reliance Communications Q2 net plunges more than half                                       

Mon, 02 Nov 2009

 NEW DELHI - Reliance Communications, India's No. 2 mobile operator, said quarterly net profit fell more than half, as network expansion costs, derivative losses and low-paying users weighed.

India's mobile industry, the world's fastest-growing major market, is becoming increasingly competitive, with existing players cutting rates to attract subscribers before four new firms start operations this year.

The Mumbai-based firm, which trails market leader Bharti Airtel, said net profit fell 51.7 percent to 7.40 billion rupees ($158 million) for its fiscal second-quarter ended in September, from 15.31 billion a year earlier.

The company had to provide for foreign exchange losses of 2.83 billion rupees for the quarter, excluding which net profit would have been 10.23 billion rupees, it said in its earnings statement issued late on Saturday.

Reliance Communications in October cut all call charges to a flat 50 paise (1 U.S. cent) a minute, reacting to competition from rivals such as Tata Teleservices that added more subscribers than market leaders during the September quarter with its new per-second bill plan.

Reliance Communications Chairman Anil Ambani said the sector was going through a "challenging" phase in the wake of competition and price cuts, and that a market-driven industry consolidation would help.

Reliance Communications said it "fully recovered" the forex losses in October, due to subsequent favourable exchange rate movements.

Revenue for the September quarter rose 1 percent to 57.03 billion rupees from a year earlier.

Analysts polled by Reuters had on average expected the company to post net profit of 12.17 billion rupees on revenue of 63.22 billion.

Reliance Communications, the majority of whose subscribers are on CDMA, earlier this year expanded its smaller GSM business to all of India with a $2 billion investment. It has said capital expenditure for the year to March would be lower by a third from its previous guidance.

The company's shares have fallen about 43 percent in October in face of the price war. The shares had risen 6.2 percent during the September quarter, but underperformed the broader market.

Larger rival Bharti Airtel on Friday reported its slowest pace of profit growth in at least six years and gave a downbeat outlook due to the price war.

(Reporting by Devidutta Tripathy; Editing by Nick Macfie)





(Reuters)

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