Debt-ridden RCom to shut down 2G mobile business in a month: Reports

Debt-ridden telecom operator Reliance Communications is planning to shut down its 2G mobile business by the end of November, media reports said. The decision to the wind-up 2G mobile business comes days after the company also announced to wind-up DTH services after the license expires. The telecom company owned by Anil Ambani is reeling under a debt of nearly Rs 45,000 crore. The company has been given a reprieve by its lenders on loan repayments until the end of 2017, and the decision to wind up of businesses seems to be taken to meet the deadline for loan repayments.

The company, however, plans to migrate its ILD voice, consumer voice and 4G dongle post-paid services to the enterprise as long as they remain profitable, The Economic Times reported. The company has also asked a number of employees to quit as part of its winding up of the operations, PTI reported citing industry sources. The company has not made any official announcement on the decision.

The move comes after the company failed to close the merger deal with telecom operator Aircel early this month. RCom had scrapped its merger with Aircel on October 3 citing legal and regulatory uncertainties and interventions by various parties. The Anil Ambani-led group had been trying to reduce its heavy debt by Rs 25,000 crore by merging its wireless business with Aircel.

However, some respite has come to RCom this week as the Department of Telecom (DoT) has approved the merger of Sistema Shyam Teleservices (SSTL) into RCom, a deal which will add around 2 million customers and annual revenue of around Rs 700 crore to the Anil Ambani-led company.

The company is also in the process of reviewing its Rs 11,000 crore deal with Brookfield for 51% shares as the value Rcom’s mobile arm stakes will change due to lack of addition Aircel tenancies. Brookfield, which is planning to buy Rcom’s mobile arm stakes, will reportedly pay less than the previously agreed amount.

Earlier this month, Ericsson India filed insolvency petitions against the debt-laden telecom company and its subsidiaries. Reliance Communications reported its third quarterly loss in a row last month. It is trying to find ways to cut debt after lenders gave it a reprieve on loan repayments until the end of 2017. Earlier this year, rating agencies Fitch and Moody’s downgraded Reliance Communications’ debt rating deeper into junk grade. Moody’s cut it to Caa1 from B2, while Fitch lowered its rating on the company to CCC, implying that some kind of default on the company’s debt is a “real possibility”.