Focus on cost cuts on way to profits: Tata Tele

The company reported its first-ever cash profit, or earnings after interest but before depreciation and taxes, at Rs 260 mn.

High depreciation and a one-time write-off drove Tata Teleservices (Maharashtra) Ltd to report a Rs 1.52 billion quarterly net loss, but the company said its tight leash on costs was improving the balance sheet.

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The company on Thursday reported its first-ever cash profit, or earnings after interest but before depreciation and taxes, at Rs 260 million for the quarter ended March, as it cut interconnect and marketing expenses.

"We are bringing our costs down since we want to be profitable on a net basis very soon," S Venkatesan, vice president for finance, said. "Our main challenge is on the depreciation front."

During the quarter, the telecom service provider re-estimated the value of its network equipment factoring in technology obsolescence and took a depreciation charge of Rs 1.3 billion , up 13 per cent on year.

Tata also wrote off Rs 472.5 million toward flood damages to its network.

As a result, the company reported a net loss of Rs 1.52 billion as against Rs 1.78 billion a year ago. Revenue rose 42 per cent to Rs 3.08 billion.

Meanwhile, the company aimed to increase its subscriber base to 3 million in the year to March 2007, up from 1.84 million now, Managing Director, Charles Antony told reporters.

The rural market would offer maximum growth potential. "We are expanding into rural Maharashtra, which is a low teledensity market," Antony said.

The company would spend Rs 5.9 billion to add capacity, expand its reach and offer business services.

Shares of Tata Tele closed down 7 per cent at Rs 23.15 on the BSE, which crashed 6.8 per cent.