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Sunday, January 31, 2010

[sharetrading] Reliance Comm Profit Beats Estimates as Price Cuts Boost Usage

 

Jan. 30 (Bloomberg) -- Reliance Communications Ltd. reported third-quarter profit that beat analyst estimates after price cuts helped India's second-largest wireless operator to boost mobile-phone usage on its network.

Net income was 11.1 billion rupees ($240 million) for the three months ended Dec. 31, Mumbai-based Reliance said today in an e-mailed statement. That surpassed the 6.5 billion rupee median of 14 analyst estimates compiled by Bloomberg and compared with the 14.1 billion rupees reported a year earlier.

Billionaire chairman Anil Ambani slashed call rates, cutting some prices to less than half a U.S. cent a minute to win customers after overseas carriers NTT DoCoMo Inc. and Telenor ASA entered the market with cut-price plans. The reduced prices encouraged users to spend more time talking on Reliance's network, the company said.

"We expect telecom firms as a whole to do better going forward, especially since it looks like we have reached a bottom in terms of the price wars," R.K. Gupta, who helps oversee the equivalent of about $390 million as managing director of Taurus Asset Management Ltd. in New Delhi, said before the announcement. Taurus has held Reliance shares in the past, and Gupta declined to say whether he still owned the stock. "The sector appears to be on the path to recovery after a rough year."

Reliance fell 0.9 percent to 169.80 rupees in Mumbai trading yesterday. The stock fell 24 percent in 2009, making it the worst performer on the benchmark Sensitive Index, which climbed 81 percent in the period.

Third-quarter sales were 53.1 billion rupees, 9 percent lower than the 58.5 billion rupees Reliance reported for the year earlier period.

"Better Placed"

"As an integrated and converged telecommunications service provider we are better placed to withstand the present highly competitive environment," Ambani said in the statement. "Despite the sharp fall in tariffs, we have demonstrated stability in wireless revenues and margins and are confident to emerge even stronger in the future."

Customers increased the time they spent using Reliance's network 23 percent from the preceding three-month period, the company said.

Bharti Airtel Ltd., India's biggest mobile-phone company, reported Jan. 22 profit rose 2.3 percent to 22.1 billion rupees after price cuts boosted traffic on its wireless network.

Reliance's subscriber growth outpaced Bharti's in the last quarter, according to data from the Telecom Regulatory Authority of India. Reliance had 93.8 million subscribers as on Dec. 31, compared with Bharti's 118.9 million. India, the world's largest mobile-phone market by subscribers after China, had more than 525 million wireless customers at the end of December.

Tower Unit Stake

Reliance has started talks with select investors to raise about 25 billion rupees by selling a 5 percent stake in its mobile-phone tower unit, Reliance Infratel Ltd., the Telegraph reported on Jan. 19, citing bankers it didn't identify.

The operator's plan to sell a 10 percent stake in the unit through an initial public offering was approved by the Securities and Exchange Board of India this month, the newspaper said. The company aims to raise as much as 50 billion rupees through the share sale, according to the report.

Gaurav Wahi, a spokesman for Mumbai-based Reliance Infratel, declined to comment when contacted by Bloomberg News at the time.

"Financials are likely to bottom out in the fourth quarter" before revenue growth resumes at India's wireless operators, Sanjay Chawla and Yogesh Kirve, analysts at Anand Rathi Financial Services Ltd. in Mumbai, wrote in a report dated Jan. 18.

To contact the reporter on this story: Mehul Srivastava at msrivastava6@bloomberg.net.


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