Mukesh Ambani's Jio effect puts Anil Ambani's Reliance Communications under pressure; debt concerns rise

Ambani brothers are yet again at loggerheads, even though not directly. Elder brother Mukesh Ambani's ambitious dream of introducing Reliance Jio has changed the entire landscape of India's telecom sector effecting many top players, including his brother Anil Ambani's Reliance Communications.

Outstanding Debt: The company's gross debt stood at Rs 45,733.4 crore as on March 2017. RCom has said that it's likely to retire about Rs 25,000 crore debt from the sale of its towers business to Brookfield and impending merger with Aircel. The lenders have turned cautious though, and categorised their exposure to RCom as special mention account.

"RCom has formally advised all its lenders that it will be making repayment of an aggregate amount of Rs 25,000 crore from the proceeds of these two transactions, on or before September 30, 2017," PTI quoted RCom as saying in a statement today.

Q4 Results: On Monday, Reliance Communications announced the fourth quarter results. A look at the figure give an indication that things are not going fine for RCom. The company reported considerable drop in revenues and net profits, both annually and sequentially. For instance, RCom's revenues dipped 24 per cent to Rs 4,524 crore in January-to-March 2017 as compared to corresponding period last year. The company reported net loss of Rs 948 crore in last quarter as against net profits of Rs 79 crore in the same period last year.

Drop in Rcom's voice customers: The onslaught by Reliance Jio has affected the voice revenues of all telecom operators, largely affecting their voice ARPUs, but in the case of RCom, it's even worse. The drop in Rcom's voice customers shows that people are switching from its network to other telcos. So far, the larger operators like Airtel, Vodafone India and Idea Cellular have kept their voice customer intact. RCom, on the other hand, have not been able to keep customers under its fold who are leaving in hordes, as the latest numbers suggest.

Major decline in data customers: Reliance Communications has registered decline in total data customers, total data traffic and data usage per customer. For instance, its total data customers fell from 38.9 million a year ago to 28.3 million in the last quarter. The total data traffic on its network dropped to 79,554 million megabits in the last quarter to 104,743 million megabits a year ago.

Depreciating shares: Reliance Communications' shares have depreciated around 40 per cent this year. In a sign of stress, the company's leverage, measured by total debt to equity, rose to a record high of 1.6 times, up from one time in 2012, according to company filings.

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