Reliance Communications Profit Misses Analyst Estimates

Reliance Communications Ltd. (RCOM), India’s third-largest mobile-phone company, reported first- quarter profit that missed analysts’ estimates as rising competition and finance costs squeezed margins.

Net income rose 3.2 percent to 1.62 billion rupees ($29 million) in the three months ended June 30, from 1.57 billion rupees a year earlier, the Mumbai-based company said in a statement on Aug. 11. That lagged behind the 1.84 billion-rupee median of 18 analysts’ estimates compiled by Bloomberg.

Billionaire Anil Ambani’s flagship company joins Bharti Airtel Ltd. (BHARTI) in reporting profits that missed estimates as competition curbed margins in the world’s second-largest market for mobile services, and finance costs rose. Reliance’s share of wireless subscribers dropped for three consecutive months, while Bharti and the Indian unit of Vodafone Group Plc (VOD) increased their share.

“Competition is affecting Reliance Communications and all the incumbents,” Ankita Somani, an analyst at Angel Broking Ltd. in Mumbai, said before the earnings announcement. “What I’m worried about is that Reliance provides a lot of free minutes in its network -- there are a lot of subscribers getting those, not contributing anything to revenue.”

Shares of Reliance fell 0.4 percent to 54.70 rupees in Mumbai on Aug. 10, compared with little change in the benchmark Sensitive Index (SENSEX), or Sensex. The stock has lost 22 percent this year, compared with a 14 percent jump in the Sensex. Bharti has declined 26 percent.

Reliance’s market share fell to 16.55 percent at the end of June from 16.65 percent at the end of March, according to India’s telecommunications regulator. Bharti increased its share to 20.05 percent from 19.72 percent in the same period.

Revenue rose 8.5 percent to 52.6 billion rupees, from 48.5 billion rupees a year earlier. That missed the 53.7 billion- rupee median of 21 analysts estimates compiled by Bloomberg.

Finance cost rose 35 percent to 5.5 billion rupees during the period, according to the statement.

Reliance had 155 million connections at the end of June, according to the nation’s telecommunications regulator.

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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