RELIANC E COMMUNICATION

The company posted a  bumper over 6 times, sequentially, surge in its consolidated net profit at Rs.675 crore but before we start beating the victory drums, it should be known that this rise was only thanks tol the provision write back of Rs.441 crore. Rcom recalibrated the need to maintain a balance of Rs.441 crore of provision for business restructuring created pursuant to the schemes of amalgamation approved by High Court in financial year 2006-07. The board determined that it is no longer required to maintain provision, hence that amount credited to other income. But for this write back, the performance would have been dull with net profit coming in at Rs.234 crore. But the markets are happy because most had expected net profit to come in the region of Rs.108 crore. Its consolidated revenue was down 1% (QoQ) at Rs.5361 crore. EBIDTA rose 9% at Rs.1854 crore and this mean better operating margins, which came in at 34.6%, up by a smart 320 bps (QoQ).

But what was also disappointing was the fall in average revenue per user (ARPU), which sequentially, fell 7% at Rs.120 and average revenue per minute (ARPM) was down 5% at 43.3 paise. This is the season when farmers toil on the field thus seasonally, this quarter most mobile companies report a decline in usage and Rcom too showed a drop of 4% (QoQ) to 101.5 billion minutes. On the other hand, Bharti Airtel had reported a consolidated ARPU in India, which was also down 4% at Rs.192, higher than Rcom and total voice minutes was down 3% while its ARPM for voice in India rose 1% at 36.47 paise., much lower than Rcom. Its debt remains high as is evident from the higher interest outgo during the quarter at Rs.676 crore, up 14% (YoY). With further rate hike expected from RBI in the coming months, this burden is only expected to go up.