The 86 percent drop in earnings for the three months through March was the seventh straight quarterly profit decline for the company, which is weighed down by net debt that stood at $7.1 billion and competes with more than a dozen rivals.
“Its high debt of course is a problem at the balance sheet level, but the company’s operational parameters are also very weak compared to its peers,” said a Mumbai-based telecoms analyst with a local brokerage, who did not want to named as he is not authorized to speak to media.
Call prices in India steadied last year after a fierce price war that led to sharp tariff cuts, but Reliance Comm has lagged rivals such as Bharti Airtel and Vodafone’s local unit by revenues and minutes of usage per mobile user.
Reliance Comm’s mobile average revenue per user (ARPU), a key metric, fell an annual 23 percent in the March quarter to 107 rupees ($2.37) per month. Bharti’s monthly ARPU for India fell an annual 12 percent during the same quarter to 194 rupees.
Reliance Comm, controlled by billionaire Anil Ambani, has been unsuccessful in its efforts to raise funds to cut debt.
“Strategic initiatives” are under way to deleverage its balance sheet, Syed Safawi, head of the firm’s wireless unit, told analysts on a conference call but did not give details.
An ongoing investigation into a huge telecoms licensing scandal is an overhang on the sector, with fates of dozens of licenses hanging in the balance.
A unit of Reliance Comm and three group executives are among those charged by federal police in their investigation into the corruption scandal, which a state auditor said may have cost the exchequer up to $39 billion in lost revenue.
The executives have been held in custody, pending trial. All accused in the telecoms case have denied any wrongdoing. Reliance Communications on Monday reiterated in a statement the police charges had no impact on its businesses and operations.
Before the results, Reliance Comm shares closed 2.9 percent higher at 87.55 rupees in a Mumbai market that fell 0.2 percent. Reliance Communications shares, worth about $4 billion, have lost nearly 40 percent of their value this year, making it the worst-performing stock in the benchmark index.
Reliance Comm has in recent months started rolling out high-speed third-generation (3G) networks and is betting on take-up of premium services to boost margins after spending $1.9 billion in an auction last year for radio airwaves.
Safawi said the firm was discontinuing free minutes given to callers and focusing on paid minutes, and “very aggressively” driving data growth, having expanded high-speed Internet and 3G networks to 850 cities and towns, from 65 nine months ago.
“Those two are our growth engines. So, therefore, we feel much more positive about our portfolio and therefore profitability,” he said.
Reliance Comm said consolidated net profit fell to 1.7 billion rupees in its fiscal fourth quarter, from 12.2 billion rupees reported a year earlier.
Revenue rose about 55 percent from a year earlier to 78.8 billion rupees, driven by an accounting change for its global business segment that mostly caters to corporate customers. Net revenue in that unit more than doubled to 38.3 billion rupees.
A Reuters poll of 10 brokerages had on average expected net profit of 3.1 billion rupees on revenue of 51 billion rupees for the Mumbai-based firm, which had about 139 million mobile subscribers at the end of April.
Reliance Comm has earmarked 15 billion rupees in capital expenditure for the year to March 2012, compared with a total 43 billion rupees spent last fiscal year when it rolled out 3G.
Depreciation rose to 35.5 billion rupees for the March quarter, from 10.85 billion a year earlier. Interest expenses for the quarter were 2.2 billion rupees against interest income of 8.1 billion rupees in the year-ago quarter.
