RCom Q1 net plunges 85% at Rs 251 cr

Reliance Communications (RCom), India’s second-largest mobile phone operator, reported a bigger-than-expected fall in June-quarter profit as sharply lower call charges after a vicious price war hit margins.

The firm, controlled by billionaire Anil Ambani, said on Friday net profit fell 85 per cent to Rs 251 crore for its fiscal first-quarter, compared with Rs 1,637 crore reported a year earlier.

A Reuters poll of 10 brokerages had on average expected the company, which had about 111 million users as of end-June, to report net profit of Rs 658 crore.

India is the world’s fastest-growing mobile market adding subscribers at a monthly average of 16 million, but stiff competition in a crowded market led to firms cutting call charges to grab subscribers faster than rivals.

After call prices in India tumbled to as low as 0.4 US cents a minute — with most of the price declines taking place in the second half of 2009 — there were no big price cuts in April-June.

RCom’s bigger rival Bharti Airtel earlier this week reported quarterly profit fell by almost a third but signalled a bottom for the struggling cellular market as cut-rate price shows signs of stabilising after the price war.

RCom is hiving off its telecoms towers business to help reduce its high debt, and is also looking for a strategic investor to sell up to 26 per cent stake in itself.

But the sector faces pressure from recently-completed auctions for 3G and broadband airwaves which cost far more than expected and most of it was funded by debt. Reliance Comm spent about $1.8 billion to acquire 3G licences.

Ahead of the results, shares in RCom, valued at about $7.7 billion, fell 2.9 per cent in a Mumbai market that closed 0.5 per cent higher.

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