Reliance Communications shares, bonds plunge as losses, debt woes mount

Indian mobile carrier Reliance Communications Ltd saw its shares and bonds plunge on Monday after it posted a fiscal fourth-quarter loss and its first-ever full-year loss over the weekend, sparking renewed fear about its heavy debt load.

In a detailed report released on Monday, the company that is attempting to tackle its debt issues by forging a merger with a smaller rival and selling an interest in its tower segment, said cash flows from operations turned negative in the period ended March 31.

Banking sources told Reuters that the company, backed by billionaire Anil Ambani and widely known as RCom, is also running behind on some loan repayments.

RCom declined to comment on the matter and said executives would provide more clarity on a conference call today at 4 p.m.

The Economic Times newspaper earlier on Monday reported that RCom had delayed repayment of loans to more than 10 banks.

RCom said in its report that it is seeking loan covenant waivers from banks, without providing further details.

Shares in the company fell more than 20 percent to hit an all-time low of 19.70 rupees on Monday, before paring losses in mid-afternoon trading. The stock, which has lost nearly 35 percent in the last 10 trading sessions, was down 20.4 percent at 20.50 rupees as of 0923 GMT.

A sell-off in its 2020 bonds also resumed on Monday with yields spiking to 17.7 percent after ending at 12.3 percent last week.

PRICE WARS

The company on Saturday posted its second consecutive quarterly loss, dragged down by a price war in the wireless market sparked by the launch of Reliance Jio – a venture backed by Anil’s elder brother and India’s richest man, Mukesh Ambani.

Anil won control of RCom after the Reliance empire was split following a feud between the brothers. Mukesh ended up with the core energy unit, while Anil won control over the conglomerate’s telecom, financial services and power businesses.

The once-feuding brothers have since made up, with Mukesh’s Reliance Jio entering pacts with Anil’s RCom to share towers and networks. But the price war sparked by months of free voice and data services from Jio have dented not only RCom, but bigger rivals Bharti Airtel Ltd, Idea Cellular Ltd and Vodafone India Ltd.

RCom’s customer base fell to 84.7 million subscribers as at the end of March, from 87.7 million at the end of December as the free services offered by Jio weighed. The firm said average revenue per user also fell 8.4 percent to 141 rupees in the fourth quarter, from 154 rupees in the three months to December.

RCom’s net debt rose 3.6 percent to 443.45 billion rupees ($6.87 billion) as of March-end, from 428.03 billion rupees three months prior.

Debt-laden RCom said it aims to cut debt by selling properties in New Delhi and the outskirts of Mumbai.

It is also attempting to reduce its debt burden by merging its wireless business with rival Aircel Ltd, and selling a 51 percent stake in its tower business to Canada’s Brookfield Infrastructure Group for 100 billion rupees.