RCom exiting 2G, 3G services, to focus on 4G

Debt-laden Reliance Communications Ltd (RCom) said on Wednesday it will concentrate on offering 4G mobile broadband services in a bid to turn the heavily indebted business around.

The announcement means Anil Ambani's struggling telco RCom is moving towards closure of the voice-heavy 2G and 3G mobile business, a development which according to The Times of India may shave off more than three-fourths of the loss-making company's estimated 80-million customer base.

On Wednesday, RCom said it will be "optimising its 2G and 3G footprint, and related infrastructure and human resources" with effect from 30 November, without elaborating further.

The closure also comes at a time when the group is shutting down its DTH (direct-to-home TV) business when its licence expires next month.

As part of the plan RCom said its 4G services will run through an existing deal to share radio spectrum with Reliance Jio, the 4G network of Reliance Industries, controlled by Anil's brother Mukesh Ambani.

Earlier this month, RCom said it would evaluate an alternative plan for the mobile business after a deal fell through to merge the unit with rival Aircel.

The company, which has Rs43,386 crore ($6.7 billion) of debt, won a temporary reprieve from its lenders on its debt-servicing obligations in June. RCom has agreed to give the banks stakes in the company by swapping part of the debt for equity.

It was initially banking on the wireless merger deal and a separate deal to sell a stake in its radio tower infrastructure business to cut its debt load by 60 per cent. After the wireless deal fell apart RCom said it would also amend the masts deal with Canada's Brookfield Infrastructure.

The deal with Aircel would have enabled RCom to cut its debt by nearly Rs14,000 crore. The companies blamed its collapse on "inordinate delays" caused by "legal and regulatory uncertainties and various interventions by vested interests".

A source close to the matter told Reuters this means RCom is set to shutdown parts of its wireless operations, as reported by other media as well.

RCom, which began operations in 2002, said in a statement, "RCom has decided to adopt a 4G-focused strategy for profitable growth of its wireless business. Accordingly , RCom will be optimising its 2G and 3G footprint, and related infrastructure and human resources, with effect from 30 November.

"The company's 4G-led strategy will be executed, as at present, on the back of capitallight access to India's most extensive 4G mobile network, through already operational spectrum-sharing and ICR (intra-circle roaming) arrangements with Reliance Jio."

RCom's executive director Gurdeep Singh is understood to have informed employees about the development and the closure of a part of the business.