Debt-laden Reliance Communications Ltd. will shut down its unsustainable second-generation wireless operations, losing nearly half of its 8 crore subscribers, weeks after the telecom operator called off merger with Aircel Ltd.
About 3.7 crore 3G and 4G users (voice, consumer broadband and 4G postpaid dongle) will be shifted to its enterprise business as part of the restructuring, an RCom official said requesting anonymity. 2G spectrum is mostly used to offer voice services.
Reliance Communications will be “optimising” its 2G and 3G footprint along with “related infrastructure and human resources” from November 30, 2017, it said in an emailed media statement. This is because it has adopted a “4G-focussed strategy for profitable growth”, the statement added.
The company’s 4G-led strategy will be executed, as at present, on the back of capital-light access to India’s most extensive 4G mobile network, through already operational spectrum-sharing and ICR arrangements with Reliance Jio.Reliance Communications Spokesperson
Testing Times For Indian Telcos
India’s telecom operators have been under pressure from Mukesh Ambani Reliance Jio Infocomm Ltd.’s deep discounts. Revenues declined since Jio’s launch in September last year, stabilising only after the country’s newest operator began charging users in April. Smaller carriers like RCom were among the worst hit as Jio offers voice calls free. Another concern is debt arising from spectrum payments.
Merger with RCom failed due to “legal and regulatory uncertainties, and various interventions by vested interests,” Aircel said earlier. The deal was part of RCom’s effort to pare its Rs 45,733-crore debt by more than half and helped the wireless carrier win a seven-month moratorium from its lenders. Its banks had invoked Strategic Debt Restructuring in June, which gives them the right to convert debt into equity, after rating agencies downgraded the company’s debt to default following missed repayments.
After the merger fell through, RCom said it would pare debt through sale of assets. It has spectrum across 800, 900, 1,800 and 2,100 megahertz bands, valued at over Rs 19,000 crore, based on last auction pricing. The telecom operator is also looking to sell its tower assets and its land bank in Navi Mumbai and Delhi, valued at more than Rs 10,000 crore. It has already appointed investment management company JLL as an adviser.
Watch this conversation with Sanjay Kapoor, former CEO at Bharti Airtel on whether the wireless business is changing.
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