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RCom Q4 net profit up on high subscriber addition
#1
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Reliance Communications (RCom), amidst strong apprehensions about its newly launched GSM services, managed to report strong profitability numbers for the quarter ended March, 2009. The 3% rise in net profit has come on the backdrop of promotional free minutes offer and higher network expansion cost.

Surprisingly, its 11% decline in average revenue per user (ARPU) is not because of lower average revenue per minute (ARPM) but due to fall in minutes of use (MoU) per subscriber. The MoU per subscriber fell by 9.2% on a sequential basis.

However, the elasticity between MoU and new subscriber addition seems to have worked in favor of the company. The 11.3 million addition of new subscribers during the quarter translated into 4% rise in total wireless minutes and consequently 4.7% increase in total revenue.

Higher access charges, network expansion cost and depreciation & amortization charges owing higher capital expenditures incurred earlier continue to hurt the company’s wireless operating margin which contracted by around 100 basis points sequentially. Maximum amount of capital expenditure has already been incurred in previous quarters and the capex cycle is expected to slowdown in coming quarters.

For instance, the capex guidance for FY 10 is only Rs10,000 crore, almost half of what it was during FY 09. As one would have seen last year, this capex guidance might even get lowered further. The slowdown in capex may benefit operating margin going ahead as depreciation would fall gradually in the next few quarters.

RCom’s global data and broadband business recorded robust growth during the quarter. Its strategy to completely manage the global customers’ network has paid off. It’s operating profit from the global business increased by 19.3% sequentially. It won Rs700 crore of orders during the quarter, which is equally divided between wholesale and enterprise data business. However, its DTH business continues to suffer losses at operating level.

Higher other income on account of forex gain, and interest and dividend income from subsidiaries further boosted its bottomline. These items accounted for almost one third of the company’s net profit.

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#2
but their GSM servce is not good as CDMA.some network problem reported in all india.i too had problems in GSM service.
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