Indian telecom operator Reliance Communications plans to reduce its Capex (capital spending) to expand networks.
The company is chalking out a multi-pronged strategy for lowering its Capex.
First, the Anil Ambani-promoted Reliance Communications plans to use telecom infrastructure such as mobile towers and optical fiber from Mukesh Ambani-run Reliance Jio Infocomm for expansion avoiding Capex for infrastructure.
Reliance Communications Wireless CEO Gurdeep Singh said: “As a part of our reciprocal arrangement with (Reliance) Jio, the tower and fibre asset will come from Jio side. We will invest only in electronics.”
“Any future expansion that RCom will do on wireless side will be tower and fiber coming from Jio in reciprocal or if we see any other more economical viable model to expand in those markets. In times to come you will see lower Capex to sales ratio,” Singh added.
Second, Reliance Communications will also move mobile tower equipment from areas where it has less than 7 percent market share to other areas where it needs to build capacity.
“This is not a site movement but BTS (base transceiver) movement, whether GSM or CDMA. I am taking them to profitable areas. They were barely able to meet network cost,” Singh said.
Earlier, the company hinted that its network cost will come down by 10-12 percent.
In fact, Reliance Communications reduced its Capex in the last four financial years.
Reliance Communications Capex was reduced to $230 million in fiscal 2014 from $643 million in fiscal 2013, $959 million in fiscal 2012 and $1,633 in fiscal 2011.
The latest development will be a big blow to telecom network vendors such as Ericsson, Nokia Networks, Alcatel-Lucent, ZTE, Huawei, Cisco, NEC, etc.Currently, Ericsson and Alcatel-Lucent are the main network equipment partners of Reliance Communications.
Through this initiative, Reliance Communications will reduce its debt by about 37 percent to Rs 25,500 crore in the next 12 months, PTI reported.
Reliance Communications had net debt of Rs 40,222 crore at the end of June 30, 2014. The company in the first week of July had raised about Rs 4,800 crore in a QIP that was used to reduce debt to about Rs 35,000 crore.
The company also expects to finalize the long pending deal to sell a significant stake in its international submarine optical fiber company Global Cloud Xchange, formerly Reliance Globalcom, in the next 3-4 months.
Reliance Communications is also working to realize money from its real estate assets in Mumbai and Delhi which are valued at about Rs 5,000 crore.
The company expects to complete delivery of its mobile tower service to Reliance Jio soon that will fetch RCom about Rs 12,000 crore over a period of time. The company will securitise this with banks to raise about Rs 6,000 crore.
Thus overall debt should come below Rs 25,500 crore in the next 12 months.
Meanwhile, RCom’s 7 licenses are coming up for renewal in 2015 and will have to buy spectrum afresh to continue business through these permits.