Anil Ambani hangs up on 2G services

After putting a brake on its direct-to-home (DTH) business, Reliance Communications plans to shut down its 2G mobile business by the end of November this year, while continuing to operate its 4G services through existing tie-ups with Reliance Jio.

Anil Ambani-owned RCom, reeling under high debt of Rs 45,000 crore, has been struggling to keep its business afloat. A merger with Aircel was called off due to regulatory issues, though the merger of Sistema Shyam's wireless business got an approval from the Department of Telecommunications on Monday.

In communications sent to all of its channel partners, RCom said it will shut down its GSM business by November 30. All pending claims of distributors will be settled down and all customers will get a porting code.

The company will shut down its DTH business -- Reliance Big TV -- once its licence expires on November 21 and shift users to a different platform.

RCom executive director Gurdeep Singh is learnt to have informed employees that the company has reached a "situation where we need to call it a day on our wireless business" and this would lead to a closure of "wireless business 30 days from now", according to news agencies. The company will "continue to operate ILD voice, consumer voice and 4G dongle postpaid services" and mobile tower business till the time they remain profitable and all the other business will be shut down, he is learnt to have said.

It has about 80 million subscribers, half of which are on 2G services and 7,000 employees.

In an emailed response, an RCom spokesperson said, "As already announced on 1 October 2017, RCom has decided to adopt a 4G-focused strategy for profitable growth of its wireless business. Accordingly, RCom will be optimising its 2G and 3G footprint and related infrastructure and human resources, with effect from 30 November 2017."

The company's 4G-led strategy will be executed, as at present, on the back of capital-light access to India's most extensive 4G mobile network, through already operational spectrum-sharing and ICR arrangements with Reliance Jio, the statement said.

In a statement to BSE, RCom said DTH operations is a non-core business of the company provided through Reliance BigTV Ltd, a subsidiary of the Company. RBTV's DTH licence is expiring by end of November 2017 and the company is currently working with three leading DTH operators for seamless migration of customers to enjoy uninterrupted services.

Today's development comes after its deal with Aircel to merge wireless business failed to take off earlier this month. RCom and Aircel in September last year had signed a binding agreement to merge their mobile businesses. But this month RCom announced that the agreement had lapsed owing to legal and regulatory uncertainties, objections by interested parties and delays in receiving relevant approvals.

For the first quarter of the ongoing fiscal, it posted net losses of Rs 1,210 crore compared to a net profit of Rs 54 crore in the corresponding period last year. The revenues declined 31.6% to Rs3,591 crore during the first quarter.

On October 1, the company announced a plan to reduce its debt by Rs 25,000 crore through monetisation of tower, fibre assets, real estate and optimisation of the spectrum portfolio. RCom's spectrum portfolio has gross value of over Rs 19,000 crore for balance validity period, based on last auction pricing. An independent third party valuation for development of 125-acre prime real estate in Navi Mumbai established significantly higher present value monetisation potential of Rs 10,000 crore, the company had said earlier.

Currently, RCom is under strategic debt restructuring till December 2018 where banks won't collect interest payment. Ericsson had filed for insolvency in the NCLT under the newly-formed Insolvency and Bankruptcy Code to recover Rs 1,150 crore from RCom for the supply of services and equipment.

The telecom industry has shaken up since the entry of a new player Reliance Jio, owned by Mukesh Ambani, last year. Since then the industry is in a consolidation phase where Vodafone and Idea Cellular have announced a merger, Airtel has acquired Telenor and wireless business of Tata Group, RCom and Sistema Shyam are close to a merger of their wireless business. It is moving to a scenario where only three private telecom players apart from the government-owned BSNL/MTNL will survive.