RCom’s first ever net loss prompts calls for government action

RCom’s first ever net loss prompts calls for government action

India’s sixth largest operator Reliance Communications has called for government intervention to ease the debt burden and fierce competition faced by players in the telecoms industry.

For the fiscal year ending on 31st March, RCom registered its first ever annual loss, amounting to INR12.85 billion. The operator has debts of INR440 billion ($679 million), and its shares have fallen by 21% following revelations that it is behind on its repayments for loans from ten different local banks.

After 4G provider Reliance Jio entered the Indian mobile space last year, its low tariffs have spurred intense competition among operators that has resulted in consolidation. RCom itself is spinning of its wireless business and merging it with Aircel, in a deal that is awaiting regulatory approval. Last October it also sold 51% of its tower business to Canadian firm Brookfield Infrastructure Group, receiving a cash injection of $1.7 billion.

Using the proceeds from these transactions, RCom’s co-CEO Gurdeep Singh has informed its creditors that it will be able to deliver payments of INR250 billion by 30th September of this year. He also noted that the industry-wide trend of falling revenues was the first decline witnessed in India for 20 years, and added that this was having a knock-on effect in terms of contributions to the government.

In order to address this, Singh proposed that India’s regulator TRAI could adopt a different method for working out adjusted gross revenues, as this would push down licence fees and spectrum usage charges. A different method could also do away with interconnect usage charges, which would be timely as the industry increasing abandons billing by the minute/gigabyte.

RCom’s Q4 net loss was INR9.66 billion – a major decline considering it saw a profit of INR900 million during the same period a year prior. It cited Jio’s free service promotions as a significant factor, with Singh noting that the disruptive pricing model of offering prepaid users unlimited free voice should have been emulated by RCom. The operator lost 3 million subscribers in the quarter, with fellow operators Bharti Airtel and Idea Cellular also reporting significant Q4 losses.

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