Reliance Communications (RCOM) has reported a year-on-year decline of 22.4 per cent in its net profits, from Rs 2.27 billion during the quarter ended March 2015 to Rs 1.76 billion during the corresponding quarter in 2016. The decrease in the company’s bottom line can be attributed to a 6.25 per cent increase in its operating expenditure, from Rs 37.27 billion to Rs 39.6 billion, during this period. The rise in operating expenses, coupled with a 16.67 per cent increase in the net finance cost, made a dent in the operator’s profits. Meanwhile, finance costs grew from Rs 6.66 billion to Rs 7.72 billion.

The company’s revenue, on the other hand, showed a 3.7 per cent growth, from Rs 57.03 billion during the quarter ended March 2015 to Rs 59.18 billion during the corresponding quarter in 2016. However, the earnings before interest, taxes, depre­cia­tion and amortisation (EBITDA) ­margin de­­­clined from 34.7 per cent to 33.1 per cent.

RCOM’s India operations contributed 81 per cent to its overall revenue while the global operations contributed 19 per cent. The EBITDA from the India operations increased by 2.6 per cent, from Rs 17.13 billion during the quarter ended March 2015 to Rs 17.59 billion during the cor­responding quarter in 2016. However, the EBITDA from global operations decreased from Rs 2.63 billion to Rs 1.99 billion.

Operational highlights

The operator’s subscriber base reduced from 110.7 million as of March 2015 to 103.6 million as of March 2016. As a result, the total minutes of usage on the operator’s network decreased from 108.1 billion to 101.6 billion. However, the operator posted a 6.8 per cent increase in its ARPU, from Rs 147 to Rs 157. This may have been on account of a 6.4 per cent decrease in the operator’s subscriber base even as revenue grew by only 3.7 per cent.

The share of data services in RCOM’s total revenue increased from 25.2 per cent during the quarter ended March 2015 to 31.8 per cent during the corres­ponding quarter in 2016. Meanwhile, the total data traffic on the operator’s network rose from 87.21 billion MB to 104.7 billion MB. This increase was largely on account of a 15.4 per cent increase in the operator’s total data customers, from 33.7 million to 38.9 million. The number of 3G customers increased significantly, from 17.4 million to 24.2 million, while data usage per customer went up from 893 MB to 899 MB.

As of March 2016, RCOM’s network comprised 76,194 sites including 12,265 3G sites. The operator has rolled out 3G services in all the 13 circles in which it holds 3G spectrum. In addition, it offers 3G services through intra-circle roaming arrange­ments in five circles – Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Uttar Pradesh (East).

Outlook – 4G focus

The operator has been meticulously planning its 4G foray in terms of market readiness and creating a technology-neutral 800 MHz spectrum pool. It had strengthened its spectrum holding in the 800 MHz and 850 MHz bands during the spectrum auction held in March 2015, which is expected to help the operator launch long term evolution services. It has already started the process of phased migration of its CDMA customers to 4G after the Department of Telecommunications ap­p­ro­­ved the liberalisation of its CDMA spectrum in 17 circles.

Several other developments that took place in the past few months are expected to help the operator emerge as a strong 4G player. RCOM’s merger with Sistema Shyam TeleServices, which is likely to be completed by August 2016, will give the operator the largest spectrum share in the 800-850 MHz band. RCOM is also in advanced talks with Aircel for a possible merger, with the combined entity holding 19.3 per cent of the entire spectrum allocated to the industry. These developments, along with RCOM’s spectrum sharing and trading pact with Reliance Jio Infocomm Limited, will help the operator leverage the data opportunity and gain a strong foothold in the highly competitive telecom industry.

Mridula Pandey