Indian operator calls for scrapping of interconnection charges, lower licence and spectrum usage fees.
Reliance Communications this week called for government intervention to reverse the ailing fortunes of India’s mobile market, after the operator reported its first ever full year net loss.
During an investor call on Monday, RCom’s co-CEO Gurdeep Singh called for interconnection charges to be scrapped in order to reflect the industry’s shift away from per-minute/GB-based pricing. He also called on the government to change the way it calculates gross revenue, thereby lowering licence fees and spectrum usage charges.
"Remedial policy actions and [a] financing package is critically needed to infuse operational viability in the sector," Singh said.
In the 12 months to 31 March, RCom generated revenue of 199.49 billion rupees (€2.76 billion), down 10.8% on the previous year. The company also swung to a net loss of INR12.85 billion from a year earlier profit of INR6.6 billion. It is the first time RCom has ever generated a full-year loss, Singh said.
RCom and its rivals have been rocked by the aggressive competitive tactics of newcomer Reliance Jio Infocomm.
Jio is controlled by conglomerate Reliance Industries, which is owned by Mukesh Ambani, India’s richest man and brother to RCom owner Anil Ambani. Between September 2016 and March 2017, Jio gave customers free, unlimited access to nationwide voice, messaging and 4G data services.
The subsequent price war eroded the profitability of the sector, sparking a wave of consolidation as smaller players head for the exits, and the big guns hunt for greater scale to fend off Jio.
RCom itself is in the midst of splitting off its mobile arm and merging it with Aircel. It aims to complete the deal in June, subject to approval from the Department of Telecommunication (DoT). It has also agreed to sell a majority stake in its towers business to Brookfield Infrastructure Group.
"The current stress in the telecom sector is a matter of grave concern not only for the industry players but also for the financial sector, regulators and the government," Singh warned.
RCom is particularly at risk due to its hefty net debt, which stood at INR443.45 billion at the end of March, compared to INR428.03 billion a year ago.
Its shares slumped on Monday after a report by the Economic Times claimed that the company had fallen behind on its loan repayments. Singh said during the investor call that proceeds from the Aircel merger and the towers sale will allow it to repay INR250 billion on or before 30 September.
"RCom is presently engaged in discussion with its lenders to obtain their requisite consents for the two transactions and to refinance scheduled instalments falling due in the interim period up to 30 September 2017, to facilitate expeditious closing of both transactions in the best interests of all stakeholders," Singh said.