Reliance Communications Losses Widen On Disruptive Pricing, Intense Competition

Anil Ambani-promoted Reliance Communications Ltd. (RCom) reported a consolidated net loss of Rs 948 crore in the quarter ended March 31, 2017, compared to loss of Rs 488 crore in the quarter ended December 31, 2016.

The company, in an exchange filing on Saturday, attributed the loss to the “competitive intensity on a scale never witnessed before in the country”. RCom's revenue from operations fell 10.6 percent to Rs 4,312 crore in the fourth quarter, compared to Rs 4,822 crore at the end of third quarter.

The losses were “led by the impact of free offers, disruptive pricing and unprecedented competitive intensity in the industry,” RCom said in the statement.

The earnings before interest, tax, depreciation and amortisation (EBITDA) operating income declined 21 percent to Rs 872 crore, with the EBITDA margins also contracting to 20. 2 percent.

“For the first time in over 20 years, the telecom sector registered de-growth in revenues, leading to a reduction in the government's share in revenues, sharp drop in operating margins, accompanied by increased interest costs arising from a staggering industry debt burden, and higher depreciation and amortisation charges as a result of higher spectrum purchase costs,” said the statement.

On the debt front, RCom shared its plans to reduce debt worth Rs 25,000 crore in this fiscal year. The company plans to do this by selling its tower assets to Brookfield for a total of Rs 11,000 crore. The asset sale, the company's statement noted, is in the final stages as it had received approvals from its shareholders and the Competition Commission of India (CCI).

In another merger deal, RCom will consolidate its wireless business with Aircel, reducing its overall debt by another Rs 14,000 crore. The transfer of its liability for spectrum installments to the combined entity will add another Rs 6000 crore, the company said in the statement.

The telecom service provider company said it will focus on “higher growth and margins” in its several businesses post the debt consolidation process.

Also Read: Reliance Communications Extends Tumble on Mounting Debt Concerns