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R-Comm To See Full Benefit Of Tariff Hikes In 2 Qtrs
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Shares in the company, valued at about $3.5 billion, erased early gains and fell sharply in the last hours of trading to close 8.1 per cent down at 77.55 rupees after touching a record low of 76.10 rupees, as investors remain wary about the company's bruising debt load.
Reliance Comm has increased call prices by about a fifth in most of its telecoms zones -- a move in line with rivals including market leader Bharti Airtel -- after a price war in the 15-player market strained companies' profits and as they paid billions of dollars in a spectrum auction last year.
The recent increases were the first in at least two years, after a vicious price war in the world's fastest-growing mobile market pushed call rates as low as 10 paisa, or less than a fourth of a US cent, a minute.
"My sense is it will take a good two quarters for all these changes to have a full impact," Syed Safawi, head of Reliance Comm's wireless business, told analysts on a conference call on Tuesday.
He expected the call price increases to add about 1 paisa (1/100th of a rupee) to the company's revenue per minute (RPM)over the next two quarters. For its fiscal first quarter ended June, Reliance Comm had revenue of 44 paisa a minute.
"There is relatively more price stability now in the recent quarters than we have seen in the last two years," Safawi said, adding the company did not expect "any major step down happening on tariffs in the next few quarters."
Heavy Debt Load
Reliance Comm, which on Saturday reported a sharper-than-expected 37 percent fall in June-quarter profit, has more than $7 billion in net debt and is betting on the sale of its telecoms tower unit to help reduce debt.
Several potential suitors are conducting "due diligence" on the tower business, which is 95-percent owned by Reliance Comm, Safawi told Reuters in a phone interview on Saturday. He expected a sale of the business to almost halve the company's debt load.
Reliance Comm has so far been unsuccessful in its fund-raising efforts to cut debt. A deal to spin off the tower arm into a venture with GTL Infrastructure fell apart last year.
"I haven't heard anything specific but there is lack of positive sentiment," said K.K. Mital, head of portfolio management at Globe Capital, referring to the fall in the company's share price.
"Mounting debt is also a concern."
Reliance Comm shares have fallen nearly 47 percent this year, underperforming an about 18 percent fall in the main index. Shares in Bharti Airtel are up more than 10 percent this year, while those in fourth-ranked Idea Cellular have gained nearly a third.