Reliance Communications (RCom), one of India’s smallest mobile operators, suffered a huge net loss for its fiscal Q1 ending 30 June as turnover plunged by a third due to what the operator called “the impact of disruptive pricing and unprecedented competitive intensity”.
The company posted a loss of INR12.2 billion ($190 million) for the quarter on consolidated revenue of INR35.9 billion, down 33 per cent year-on-year. Its EBITDA margin dropped by nearly half from a year ago to 15.1 per cent.
RCom’s quarterly loss follows a loss of INR12.85 billion in its fiscal year ending 31 March – its first ever annual loss.
In a statement RCom said: “The telecom sector in India continues to be very adversely impacted during the financial year 2017-18 by competitive intensity on a scale never witnessed before in the country.”
The operator, like its rivals, is facing declining profitability due to an ongoing price war initiated by Reliance Jio, which launched 4G service nationwide in September 2016. Declining mobile revenue led to asignificant drop in the licence fees the government collected from mobile operators in the opening calendar quarter of the year, according to a report from the Telecom Regulatory Authority of India.
RCom’s subscriber base dropped from 98 million in calendar Q2 2016 to 81 million in the recent quarter according to GSMA Intelligence. The operator’s market share fell from 9.5 per cent in Q2 2016 to 7 per cent at end-June. It is now ranked number seven behind both state-owned BSNL (8.6 per cent) and Aircel (7.6 per cent).
Debt reduction
A merger with Sistema Shyam TeleServices (SSTL) received all approvals and is expected to be completed this month. The merger will give RCom 30MHz of spectrum in the highly efficient 850MHz band in eight service areas.
The operator said a planned merger with Aircel is on track and will lead to an INR110 billion reduction in its debt, while a sale of its tower business to Brookfield is in the final stages of approvals and will reduce its debt by INR140 billion.
RCom is negotiating with its lenders to finalise an overall debt restructuring plan.
It said the consolidation with Airtel, which has 90 million subs, will place the new entity among the top three operators in 12 regions.
After the mergers with SSTL and Aircel are completed, RCom will have about 176 million mobile subscribers for a 15 per cent market share.
