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Reliance Boasts Profit Growth

Reliance Communications Ltd. (RCom) breezed past analysts’ profit estimates with its third-quarter earnings report Wednesday, and confirmed plans to take its FLAG Telecom Ltd. business public. (See Reliance Boosts Profits.)

India’s second largest mobile operator reported a net income of 9.24 billion Indian Rupees (US$209 million), a 198 percent increase on the same quarter last year. Analysts had expected profits of Rs7.68 billion ($173.83 million).

Like rival Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Reliance has improved profit margins to offset rock-bottom call charges and low average revenue per user. (See Bharti Sees Big Q3 Profits.) Reliance reported its EBITDA margin extended to a record 41 percent, up from 29 percent in the same quarter last year.

On that note, revenues came in at Rs37.55 billion ($849.93 million) -- up 26 percent year on year but below the expected Rs39.21 billion ($887.5 million).

Reliance added 4 million new mobile customers during the quarter to bring its total subscriber base over the 30 million mark. The carrier has a market share of 20.5 percent.

Also like Bharti, Reliance's board has approved plans to create a separate business unit to handle its wireless network infrastructure. (See Reliance Approves Tower Spinoff.) Both carriers have said the spinoffs will allow them to have dedicated teams focused on getting the most out of their networks as they expand mobile coverage -- particularly by participating in the Indian government’s push towards base station sharing to reduce network rollout costs.

According to reports, firms like American Tower Corp. (NYSE: AMT) and various U.S. private equity groups have expressed interest in acquiring stakes in the Reliance unit, which could eventually go public.

In the meantime, Reliance confirmed reports that it's planning an IPO of its FLAG Telecom submarine cable business on the London Stock Exchange . (See Reports: Reliance to Plant FLAG.)

FLAG won contracts worth over Rs4.4 billion ($100 million) during the third quarter, and Reliance says that taking the company public will "provide further focus on the unique growth opportunities" presented by growing demand for bandwidth. It recently announced it’s investing $1.5 billion in building a next-generation IP network to extend FLAG’s subsea coverage. (See FLAG Announces NGN.)

— Nicole Willing, Reporter, Light Reading

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