RCom to cut expenditures to maintain high growth

RCom to cut expenditures to maintain high growth  India's largest CDMA operator, Reliance Communications (RCOM) announced financial results for the third quarter ended December 31, 2008. The company reported marginal increase of 2.7 per cent in net profit during the period.

The Anil Ambani-promoted company reported significant decline in revenue from the wireless and broadband business segments.

Huge expenditure on network expansion also hit its profitability. It is now planning to announce sharp cut in expenditures to ensure significant growth rate. Company's chairman, Anil Ambani said, "We will invest in the range of Rs 15,000 crore next fiscal, including Reliance Infratel. Our revised capex expectation for 2008-09 is Rs 25,000."

Net profit stood at Rs 1,410 crore in the reporting quarter as compared to Rs 1,373 crore in the same period last year. Its rival and country's leading telecom operator, Bharti Airtel posted 38.8 per cent rise in its consolidated net profit while Aditya Birla Group owned company Idea Cellular recorded 7.32 per cent fall in its net profit for the third quarter.

RCOM added 5.3 million subscribers during the period. Its revenue per minute from wireless operations declined to 61 paise from 64 paise. The company recently launched GSM services which helped to increase in subscriber base to around 60 million. An analyst with Ernst & Young, Manesh Patel said, "RCom is expanding its network and services and this will definitely impact the company's revenues in the short-term."

Shares of RCOM declined 4.5% and closed at Rs 160.15 in BSE on Friday.