RCom suffers loss in Q4 due to free offers, disruptive prices

The proposed merger of SSTL’s wireless operations with RCOM, marking the 1st in-country consolidation in the Indian telecom industry.

    Anil Ambani-owned Reliance Communications has reported a net loss of Rs. 1,285 crore for the year, compared to a net profit of Rs. 660 crore in the previous year due to free offers, disruptive prices and hyper competition in the telecom industry.

    RCom suffers loss in Q4 due to free offers, disruptive prices

    The company said "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."

    "Steep declines in profitability and/or net losses have been reported for the past two-quarters by all telecom operators in the country without exception, and a couple of operators have shut down their entire operations in the country," it added.

    The telco's consolidated revenues stood at Rs 4,524 crore in the fourth quarter, down 8.1percent. EBITDA stood at Rs 1,083 crore, down 10.2 percent, compared to the trailing quarter, in line with industry trends, and led by the impact of free offers, disruptive pricing and unprecedented competitive intensity in the industry, the company said.

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    However for the overall year, the company Consolidated revenues stood at Rs. 19,949 crore, down 10.8percent, on account of free offers,disruptive pricing and unprecedented competitive intensity in the industry; the impact of complete shutdown of RCOM's CDMA operations during 1stHalf FY17; and full year impact of moving to higher cost ICR arrangements in 5 circles consequent upon end of the validity period of 900 MHz spectrum held by the Company.

    Meanwhile, the company added that "The proposed merger of SSTL's wireless operations with RCOM, marking the 1st in-country consolidation in the Indian telecom industry, has received all approvals, and is expected to be completed in June 2017. The merger will add highly valuable30 MHz of 850 band spectrum in 8 key circles, and will extend the validity of spectrum in these circles for an additional period of 12 years, till 2033."

    The combined entity will enjoy substantial benefits of scale, and capex and opex synergies with an estimated NPV of Rs. 20,000 crore. As part of this transaction, RCOM's overall debt will reduce by Rs 14,000 crore, together with the transfer of liability for spectrum installments of an additional approx. Rs. 6,000 crore.

    RCom further added "We have received approvals from the Stock Exchanges, Securities and Exchange Board ofIndia's (SEBI) and Competition Commission of India (CCI). The demerger and merger Scheme has been filed in the National Company Law Tribunal (NCLT). Approvals from the shareholders of both RCOM and Aircel have been duly received in the NCLT convened meeting during April 2017. The lenders' and other requisite consents are expected to be received in the next few months.


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