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Competition and spectrum liberalisation costs drive RCOM into the red

13 Feb 2017

A combination of ‘unprecedented competitive intensity’ following the launch of aggressive newcomer Reliance Jio Infocomm (Jio) and the closure of its CDMA business has led Reliance Communications (RCOM) to register a net loss of INR5.309 billion (USD79.29 million) for its fiscal third quarter ended 31 December 2016, reversing net profit of INR388 million in the previous quarter and INR3.027 billion in the year-ago period. The mobile provider, which is in the midst of a three-way tie-up with Aircel and Sistema Shyam TeleServices (SSTL, operating under the MTS India brand), reported total revenue of INR49.220 billion for the period, down 4.3% from INR51.418 billion quarter-on-quarter and a fall of 9.6% year-on-year. Similarly, EBITDA fell 21.8% q-o-q to INR12.056 billion. RCOM also noted that its bottom line was impacted by an increase in amortisation and interest due to the capitalisation of the 850MHz spectrum liberalisation fee.

Due largely to the arrival of Jio and its offer of free services until the end of December 2016 – which it later extended until 31 March 2017 – RCOM reported a net loss of 600,000 subscribers during the period under review, reducing its user base to 87.7 million. The cellco also registered a reduction in its mobile data and 3G/4G customer totals, losing 3.1 million total data subscribers, including 1.1 million 3G and 4G users.

On a more positive note, RCOM is expecting to reduce its overall debt by INR310 billion following the completion of the sale of a 51% stake in its tower arm Reliance Infratel to Brookfield Infrastructure (INR110 billion) and the demerger of its wireless business to Aircel (INR200 billion). Further, the operator is also expecting to see ‘significant long-term benefits’ from its LTE network and spectrum sharing agreements with Jio, which will help RCOM reduce 4G-related OPEX and CAPEX.

India, Aircel, Reliance Communications (RCOM), Reliance Jio Infocomm (Jio), Sistema Shyam TeleServices (SSTL, MTS India)

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