Reliance Communications Q2 Profit Down by 43.5 Percent

Debt-laden mobile phone carrier Reliance Communications posted its ninth straight drop in quarterly profit with investors awaiting a deal to sell its tower unit and bring in much needed funds.

India's second biggest mobile operator by subscribers said consolidated net profit after adjustment of share of minority interest and associates fell to 2.52 billion rupees ($50.4 million) in the second quarter of its fiscal year, ending in September, from 4.46 billion rupees reported a year earlier.

Its net income from operations in the quarter fell to 47.92 billion rupees from 50.23 billion. A Reuters poll of brokerages had forecast a quarterly net profit of 1.08 billion rupees on revenue of 50.7 billion rupees.

The firm, controlled by billionaire Anil Ambani said its customer base rose 2.7 percent to 147 million in the quarter. The outlook for mobile operators in India, the world's second-biggest wireless market after China, has improved since firms including Reliance Comm raised voice call prices earlier this year, the first such increase in two years.

The change is yet to be fully reflected in companies' profits but was a welcome move after a vicious price war in the crowded 15-player market kept profits under pressure for about two years.

Reliance Comm had aggressively cut prices and gave away free voice minutes to lure customers during the price war and a senior executive said in August it expects to see the full benefit of the recent call price increase in about two quarters.

Under a new telecoms policy, the government is working to relax rules to help consolidation in the crowded market that is seen as a positive for bigger firms who were hit by stiff competition from new entrants after India issued more telecoms licences in 2008.

Also, companies including Reliance Comm this year rolled out high-speed third-generation (3G) networks and are betting on take-up of the premium services to boost margins. Reliance Comm, which spent $1.9 billion in an auction last year for 3G radio airwaves, has 2.1 million 3G customers.

TOWER DEAL

Saddled with more than $7 billion of debt as of end June, Reliance Comm is looking to sell its telecoms tower unit and expects a deal to help reduce its debt by almost half. Reliance Comm said in late May it had received several buyout offers for the unit but was yet to seal a deal. Its latest debt level was not immediately available.

Reliance Comm has hired UBS and sought $5 billion for its 95-percent stake in its Reliance Infratel tower unit but potential bidders had expressed concern about Reliance's valuation being at least $1 billion too high, sources told Reuters in August.

UBS had approached private equity firms including Blackstone, Carlyle, Apax Partners and U.S. companies American Tower and Crown Castle International, the sources had said.

Reliance Comm Chairman Anil Ambani told shareholders in late September it would be the largest private equity transaction in India's history when they are able to seal a deal, without elaborating and giving a time frame.

A unit of Reliance Comm and three executives of Ambani's group are among those charged by federal police in a massive telecoms licensing scandal that is estimated to have lost the government up to $39 billion in revenue.

All accused have denied any wrongdoing. An Indian court recently started the trial in the case, which involves a former telecoms minister, a law maker and several high-profile company executives.

Shares in Reliance Comm, valued at about $3.45 billion, have lost about 42.5 percent this year, compared with a 16.2 percent fall in the main index. By comparison, market leader shares are up 10.26 percent this year, while those in No.4 cellular carrier Idea Cellular have gained more than 36 percent.