Too much greed reduces profits.

Reliance Communications or R-Com announced a profit of Rs 3.03 billion for the 3 months of this year ending on 31 March. This was 188% higher than the previous quarter on other income although 8.7% lower compared to the same period last year. Livemint, 11 May. For the whole of last financial year ending on 31 March its revenue rose 4.4% to Rs 205.61 billion and its net profit by a whopping 27.5% to Rs 6.72 billion. In spite of massive profits R-Com increased tariffs in October from 1.2 to 1.5 paise and again this month by 20-30% on all " commitment plans " used by its customers. " Operational performance was broadly in line with estimates but average revenue per minute at 43.9 paise is lower than our expectation of 44.6 paise," said Shobhit Khare, VP Research at brokerage Motilal Oswal Securities Ltd. What is that supposed to mean? Revenue per minute depends on the rate per minute charged by the company so it should be constant. It maybe that customers of R-Com are using its services for plain vanilla voice calls and not for value added services or for expensive 3G services. The rapacious government has increased taxes on every service which means that less money goes to the service provider, even though the customer is still spending the same amount, and exorbitant license fees add to costs of companies. Also retail inflation at 10% reduces spending power. Increasing tariff charges will surely result in people cutting down on the volume of usage. This is shown in the minutes growth of R-Com which is only 2.3% compared to Bharti at 5% and Idea at 8.5%. A statement by the company said that increasing charges were aimed at bringing greater revenue per minute and profitability. But already the company has reported massive profits so how much more does it want and why should its customers have to suffer to increase bonuses for executives and dividends for shareholders? However, it would be wrong to pick on R-Com because management training teaches how to screw as much money as possible from customers rather than trying to woo them with efficient, courteous and flawless service. The number of telephone connections in India have fallen from 79.6 per 100 people to 72.9. This is said to be because many 2G licenses were cancelled by the Supreme Court and operators are choosing to operate in high revenue areas because of high license fees. The average revenue per user has fallen to Rs 98 for GSM services and to Rs 80 for CDMA. In 2006 it was Rs 366 per GSM user and Rs 256 for CDMA. They say it is because charges are so low. But is it? The number of minutes of usage for GSM has dropped from 505 minutes in 2008 to 359 in 2012 and for CDMA it has dropped from 550 minutes in 2006 to 230 minutes. Greed maybe good but too much greed has the reverse effect.