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Voice tariffs may go up due to input costs: Reliance Communications

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Speaking to ET’s Romit Guha after announcing the company’s fourth quarter and annual numbers on Friday, he indicated that data prices on the other hand could fall, as telcos needed to add subscribers for the pricier services. The sharp fall in fourth quarter on year net profit was mainly due to a one off gain in the previous year’s quarter, he explained. Edited excerpts.

Can you explain the on-year fall in net profit this quarter?
Last year fourth quarter had a reversal of a provision for business restructuring cost worth Rs 550 crore, which was envisaged, but could not be booked.

Can you explain the one-off items on Q4 of 2013-2014?
There are also two one off items this quarter – one is depreciation becoming almost double because of certain impairment.Certain assets have been impaired because of end of life and some aren’t required anymore. Usually , our depreciation is around Rs 950 crore per quarter. Also, we had created some deferred tax liability. So, there is a higher tax credit, which is also a one off, it will neutralise the depreciation impact.

Finance costs continue to weigh on your results. Comment.

During the quarter, we have repaid a lot of our foreign currency loans. And parts of those are from internal accruals and some also refinanced through the rupee loans. The rupee interest costs are much higher than dollar costs.

Will you increase voice rates further going forward?
We continue to see the rates hardening in the future. This is a continuing process, and you have to keep checking the cost of the input material. We still believe there is headroom for tariffs to go up in future on the voice side.

Will you increase headline rates further in future?
Yes. The whole idea is to reduce the gap between the headline rates and the discounted minutes, and by raising the headline tariffs, we are now bridging the gap, and this endeavor will continue.

Where do you see data prices going?
India is at a stage where there are 200 million internet users while there are 900 million mobile users. We are at a stage where we need to rapidly drive adoption of the internet on 2G and 3G. So, once you make it more affordable, you can drive more adoption.

How does 2014-2015 look like for Reliance Communications?
We continue to focus on profitable, sustainable growth on the network, and we continue to increase the contribution of paid minutes and profitable minutes on the network. Data contribution is very encouraging and going forward we are soon going to reach an inflexion point in data growth.

Any updates on fund raising for paring your debt? Any updates on stake sale in Reliance Globalcom?
Our position continues to be the same. We are actively working on de-leveraging the balance sheet and in that respect , we have identified many initiatives , and Globalcom is one of those, and if we have something material, we will surely come back to you.

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