65% Anil Ambani owned and Managed Reliance Communications is under Deep Trouble with debt levels continuing to be high (net debt to EBITDA of more than 5x) despite consistent free cash flow generation. The management has not shared any insights on asset monetization in the pipeline to reduce leverage. RCom has signed Tower Sharing and Inter-City Optical Network Sharing Deal with Reliance Jio Infocomm. In this backdrop, we analyze how Reliance Jio Infocomm will eventually takeover Reliance Communications.
In the Recent Past, RCom’s capex is a fraction of other players’ investments. We acknowledge that they are an early mover in making investing in optic fiber network, but capex is still very low. Also, RCom’s BTS additions (both 2G and 3G) have been weak over the last several quarters? What could be the reason for this reluctance to invest?
RCom is continuously losing market share (both subscriber and revenue). Even on active subscriber basis your market share has moderated over the last 2-3 years. The management has no answer on how do they intend to tackle the same.
In the last several months, CDMA active subscriber addition has been very weak compared to GSM additions. Also, muted interest in 800 MHz spectrum suggests low expectations from CDMA. RCom has reconfigured CDMA network to offer High Speed broadband using the EVDO Rev A/B technology and has gained traction but has no blueprint on further CDMA business as spectrum in the 800MHz gets expensive.
RCom does not have 4G spectrum, while competitors have already started rolling-out 4G services. How does RCom plan to get on 4G? The answer to all these solutions will be the takeover of Reliance Communications by Reliance Jio Infocomm or a merger of the two entities to create a Telecom Giant is inevitable in an era of heightened public awareness where the Ambanis can give up their dreams to manipulate Govt Regulations & Policies and switch to the path of conducting professional business.