Anil Ambani led Reliance Communications has posted a loss of Rs 1,221 crore for the quarter ended June 2017 (Q1FY18), which increased 26.3% from Rs 966 crore in the previous quarter. In the same quarter last year, RCOM had reported a profit of Rs 54 crore. The company’s losses have been shooting up constantly after the launch of Reliance Jio’s unlimited calling and data plans. The market has moved from a tariff-led strategy to one of bundling (4G+unlimited calling) and the impact is being felt on both profits and subscriber base.

Some highlights from financials

  • Total consolidated income: For the June quarter, total income was at Rs 3,591 crore, down 20.6% QoQ from Rs 4,525 crore and down 33% YoY from Rs 5,361 crore revenues in Q1FY17.
  • Regional share in revenues: India operations contributed about 78.4% of its overall revenue at Rs 3,048 crore during the quarter. The rest came from RCOM’s global operations in the US, Middle East, Europe, etc.
  • Regional profits/losses share: Both Indian and global operations are running at losses: India operations suffered a loss of Rs 576 crore while global operations generated losses of Rs 65 crore during Q1FY18.
  • Expenses: Access charges, license fee and network expenses contributed to 45.9% of RCOM’s total expenditure during the quarter at Rs 2,402 crore.
  • Liabilities: India operation liabilities was at Rs 15,328 crore during Q1FY8, which accounted for 63.3% of the company’s total liabilities which stood at Rs 24,194 crore.

RCOM’s lenders initiate process to convert debt into equity

RCOM said that it has plans sell off its land assets and its DTH business, due to mounting debt. It also mulled other methods like monetization of tower units, and its 50% stake in Aircel to repay debt. The company’s lenders had decided to initiate Strategic Debt Restructuring (SDR) process, giving RCOM time until December 2017 for repayment of all outstanding debt. As per conditions under SDR scheme, if RCOM fails to make the payment by December, lenders will have the right to convert a part of the debt into equity shares.

The telco plans to pay out Rs 25,000 crore in debt (out of the total Rs 45,000 crore) to its lenders by December. To raise Rs 25,000 crore the company has two confirmed plans:

  1. Merger with Aircel’s wireless business unit which was signed in September last year will help the company reduce debt by Rs 14,000 crore.
  2. Its tower sale deal with asset management company Brookfield will also reduce debt Rs 11,000 crore. After the asset sale, the company claims that it can settle 80% of the outstanding debt amount.

Last available metrics

Note that RCOM did not reveal subscriber numbers or usage metrics in this quarter. We have written to RCOM asking for this information and will update when they respond. Last quarter’s usage, subscriber base data:

  • Total subscriber base: 84.7 million
  • Mobile broadband (3G + 4G) connections: 20.8 million in last quarter Q4FY17, down 11% QoQ from 23.4 million in Q3FY17.
  • Drop in Internet subscribers: RCOM lost 3.7 million mobile Internet subscribers during the last quarter, 3.1 million mobile Internet users in Q3FY17, and another 3.8 million data connections in Q2FY17 as the company switched off CDMA services.
  • Data usage: Total mobile data traffic generated on RCOM’s network was 79.55 billion MB during Q4FY17, down 15% QoQ from 104.8 billion MB in Q3FY17. Data usage per customer also decreased to 880 MB from 931 MB per data customer during the period.
  • Average revenue per user (ARPU): Rs 141 in Q4FY17, down significantly from Rs 154 in the Q3FY17.

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