India’s second largest mobile operator by subscribers, Reliance Communications (RCOM), has announced its financial results for the three months ended 30 June 2010, with the company revealing an 85% year-on-year decline in net profit. With hyper-competition in the wireless sector and higher interest charges highlighted as two contributory factors, in its first quarter of the 2010/11 fiscal year RCOM posted a net profit of INR2.51 billion (USD53.6 million), well below expectations, and down 84.7% compared to the INR16.37 it reported in the same period a year earlier. Revenues meanwhile also declined in the three-month period; despite the operator adding more than 20 million subscribers compared to 1Q 2009, RCOM generated turnover INR51.1 billion in 1Q 2010, down from INR61.5 billion in the same period a year earlier. The drop is in part attributed to cuts to wireless rates in a bid to counter competition from the likes of Uninor and Tata Teleservices, both of which have introduced budget tariffs. As a result, RCOM’s average revenue per user has continued to tumble, and for the three months ended 30 June 2010 it stood at INR130 per month, down from INR210 a year earlier, with average minutes of use also falling, down from 365 per month in 1Q09 to 295 a year later. Earnings before interest, tax, depreciation and amortisation (EBITDA) meanwhile stood at INR16.3 billion in 1Q10, down from INR24.5 billion in the same period last year, representing a 33.5% y-o-y decline.
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