The rating agency ICRA has downgraded Reliance Communication’s long term rating from ‘stable’ to ‘negative’. ICRA is concerned about the high level of debt – Rs 37,000 crore, at the end of last year – and the “challenging operating environment”.
The impact of the high-debt levels has been further compounded because of the steep depreciation of the rupee, says ICRA, pointing out that nearly three-fourths of RCom’s debt is foreign currency denominated.
It further notes that while the ‘rate per minute’ has stabilised at around 44 paise in the last few quarters, the ‘minutes of usage’ for the company has declined — from 262 minutes per subscriber per month in 2010-11, to 230.
Correspondingly, the ‘average revenue per user’ (ARPU) has declined from Rs 116 in 2010-11 to Rs 102 in the next year. ICRA further observes that the offtake of the 3G service is unlikely to materialise in the near term.
Furthermore, the regulatory environment is “uncertain” and there are concerns over issues such as one time payment for excess spectrum, spectrum pricing and licence renewal fee.
RCom is in advanced stages of raising funds through the listing of undersea telecommunications infrastructure network business at the Singapore Stock Exchange.
“Though the funds so raised would help the company deleverage its balance sheet, the debt level would continue to be high for the current rating category,” ICRA says.
It further notes that the cancellation of 122 telecom licences by the Supreme Court has also impacted RCom’s plans to sell stake in its subsidiary Reliance Infratel.
On the BSE on Friday, the RCom share closed at Rs 68.35.