Reliance profit up 3.2% as financing costs soar

Indian operator Reliance Communications has reported a 3.2% increase in second-quarter net income, to 1.62 billion rupees ($29 million), compared with the same period last year.

The results missed expectations based on a poll of 18 analysts conducted by Bloomberg that produced a median forecast of 1.84 billion rupees. Yet it was higher than a similar poll of 12 analysts, conducted by Dow Jones Newswires, that came up with a figure of 1.49 billion rupees.

Indian operator Reliance Communications has reported a 3.2% increase in second-quarter net income, to 1.62 billion rupees ($29 million), compared with the same period last year.

The results missed expectations based on a poll of 18 analysts conducted by Bloomberg that produced a median forecast of 1.84 billion rupees. Yet it was higher than a similar poll of 12 analysts, conducted by Dow Jones Newswires, that came up with a figure of 1.49 billion rupees.

Reliance’s revenues rose by 8.5%, to 52.6 billion rupees, but the operator was hit by the costs of servicing its debt of about $7 billion. Financing costs soared by 37%, to 5.53 billion rupees, for the second quarter.

The operator has borrowed money to finance the expansion of its 3G network, but more advanced services have so far met with a lackluster response in the huge Indian market.

Like rivals Bharti Airtel and Vodafone, Reliance is struggling in a saturated market where competition is intense and prices are among the lowest in the world.

According to India’s telecoms regulator, Reliance has also lost market share at the expense of its big rivals. While Bharti increased its share to 20.05% from 19.72% in the second quarter of 2011, Reliance’s share fell from 16.65% to 16.55%.

Bharti, however, missed analyst expectations in both the Bloomberg and Dow Jones Newswires polls.

The disappointing news on the earnings front follows the recent cancellation by India’s Supreme Court of 122 telecoms licenses issued in 2008. Authorities believed the entire process was tainted by corruption, with many recipients paying fees that were just a fraction of licenses’ true value.

Although several operators were forced to quit the Indian market following that decision, competition between the big players does not appear to have slackened.