Reliance Communications (RCom) has exited the flagship wireless businesses. It has hived-off its fiber and related infrastructure assets worth of Rs 3000 crore to Reliance Jio, with 178,000 km fiber transferred to Reliance Jio Infocomm. A week before this it had announced completion of the sale of its media convergence nodes (MCNs) and related infrastructure assets, worth Rs 2000 crore to Jio. It is also looking to selling its spectrum, and the enterprise-focused offerings including subsea cables, international fixed line, and data center businesses.
The proceeds from the sale will go to its creditors. RCom had to be dragged into the SDR after it failed to meet its debt repayment commitment of Rs 46,000 crore to 39 lenders, including a group of over dozen banks and Chinese lenders. Ericsson India Pvt Ltd, which had signed a seven-year deal in 2014 to operate and manage RCom’s nationwide telecom network, had dues pending of Rs 1500 crore. The vendor moved the NCLT to recover its dues by auctioning RCom. It settled for Rs 500 crore, to be paid by September 30, which was appealed in the Supreme Court by RCom for an extension of 60 days. RCom, in a regulatory filing to the BSE, said it will receive Rs 975 crore from sale of spectrum, and that it will pay Ericsson Rs 550 crore and RITL (Reliance Infratel) minority investors Rs 230 crore from the spectrum trading proceeds.
The company expects to raise about Rs 18,000 crore by selling its wireless assets to Jio and realty assets to Canada’s Brookfield. Jio would also take over spectrum payment liability worth Rs 7000 crore. RCom’s wireless assets that will eventually go to Jio include 122.4 units of 4G airwaves across the 850, 900, 1800, and 2100 MHz bands; over 43,000 towers; and 178,000 route km of fiber with a pan-India footprint. Recently, the company decided that it would sell an additional 65 MHz spectrum in the 800 MHz band to Jio for Rs 3500–3700 crore which would help it reduce its debt further.
RCom, together with its subsidiary Global Cloud Xchange Limited (GCX), has been a leading global communications services provider with businesses including a vast global subsea network; a global on-net cloud ecosystem; extensive India and global enterprise business; India data center business (IDC); and India national long distance (NLD) business.
RCom and GCX currently served nearly 40,000 Indian and global corporations, including over 200 global, regional, and domestic carriers. RComM conducted a substantial portion of its business through subsidiary companies, including, GCX, Reliance Communications Infrastructure Limited (RCIL), and RITL.
India enterprise services. In India, RCom provides wireline telecom services to the business and government segments. These include a comprehensive portfolio spanning network connectivity, cloud connectivity, enterprise voice, cloud telephony, access number services, and wholesale voice. The company currently serves nearly 40,000 businesses and agencies of all sizes – from multinational conglomerates to SMEs – belonging to almost every vertical: BFSI, manufacturing, logistics, healthcare, IT and ITeS, OTT, and new media, to name just a few.
Data centers. When RCom was set up IDC in 2002, it virtually heralded the third-party data center business in India, setting the stage for world-class facilities within the country. Over the years, the company has built infrastructure and expertise and is today a leading provider of data center services across key markets globally. RCom has nine world-class data centers spread across key business markets in India (Mumbai, Bengaluru, Chennai, and Hyderabad).
Reliance Infratel Limited (telecom infrastructure business). RITL, a subsidiary of RCom, is in the business of building, owning, and operating telecommunication towers, optic fiber cable assets, and related assets at designated sites, and to provide these passive telecommunication infrastructure assets on a shared basis to wireless service providers and other communication service providers under long-term contracts.
Financial performance. On a consolidated basis, the company earned total revenues of Rs 4684 crore. The net loss after tax recorded by the company was Rs 24 crore. Total operating expenditure stood at Rs 3785 crore. The company earned EBITDA of Rs 899 crore. The EBITDA margin for the year was 19.20 percent. The depreciation and amortization charges were Rs 721 crore. The loss before tax was Rs 8 crore. Tax was to the tune of Rs 16 crore and the loss after tax was Rs 24 crore.
As on March 31, 2018, the company had total assets of Rs 74,578 crore. Stakeholders’ equity was Rs 2783 crore, while net debt (excluding cash and cash equivalents) was Rs 46,470 crore, giving a net debt to equity ratio of 16.70 times.The revenues for the financial year ended March 31, 2018 for RCom’s India operations were Rs 2534 crore.
The EBITDA during the same period was Rs 286 crore (USD 44 million), while the EBIT (earnings before interest and tax) was Rs 220 crore.
The company narrowed its losses in the fiscal first quarter ended June 30, 2018, significantly from the previous quarter, which included the impact of a one-time charge the Anil Ambani-owned telco had to factor in due to the closure of its wireless assets.
For the April–June quarter, RCom posted a loss of Rs 343 crore compared with Rs 19,776 crore in the previous quarter. The total income stood at Rs 1008 crore, a drop of about 27 percent when compared on a like-to-like basis. However, the revenue was up from the Rs 976 crore, the telco posted in previous quarter. RCom’s net loss from continuing operations was Rs 110 crore.
RCom will be left with one-tenth of its original employees, serve 10,000 customers, and have a debt of Rs 2800 crore. It will continue to operate in the B2B segment, which includes the submarine cables and enterprise businesses.
“The first priority for RCom, which is credited for democratizing telecom services through cheaper offers in early 2000s, is to resolve its over `40,000 crore debt.
We have decided that we will not proceed in this sector. We will completely exit the telecom business and concentrate on the real estate business. We are resolving the debt through a strategic debt restructuring (SDR) process. I am confident of getting a resolution in the next few months, and other monetization measures, including sale of telecom infrastructure and fiber to Reliance Jio, are at an advanced stage of closure. RCom is awaiting final approvals for spectrum sharing and trading from the Department of Telecom.
It would be most appropriate for me to thank and acknowledge the support (and) guidance extended to RCom and me personally by my brother Mukesh bhai Ambani.
There has been a creative destruction of the telecom sector that has resulted in creation of oligopoly, which is going toward a duopoly and may be even a monopoly in the future. Banks are saddled with over `7.7 lakh crore in debt and the financial troubles of operators have resulted in over 20 lakh job losses.
As we move out of the mobile sector, we will monetize our enterprise business at an appropriate stage. Reliance Realty will be the engine of growth for the future of this company. The residual company will serve 35,000 businesses through the enterprise, data centers, undersea cables, and international voice calling verticals and will get half of its revenues from abroad.”