The telecom sector is under pressure. That much at least, is no big secret. However, now Reliance Communications is asking regulators and the government to step in and help it deal with bad loans. The company has asked regulators to assist the telecom industry which is suffering under a 7.5 lakh crore debt.
Reliance Comm on its own, has a 44,000 crore debt on it. And once the company made this information public, shares dropped by as much as 20 percent to reach a price of INR 20. The company has also fallen behind on loan repayments with as many as 10 banks. It posted a loss for the first time ever since starting operations, and they totaled up to INR 1285 crore.
Indeed, many banks have even classified Reliance Communications as a Special Mention Account in their asset book, meaning that they consider its loans as non-performers. Rating agencies CARE and ICRA have already downgraded ratings of the company’s bonds due to tis performance in recent times. The company has said that it will make payments and prepayments totaling 25,000 crore once it receives proceeds from two deals it is waiting to sign — with namely, Aircel and Brookfield management.
The company has promised payments on or before 30th of September. While the Aircel deal involves a merger between Reliance, Aircel and MTS, the company is selling off 51 percent of its stakes in Brookfield.
Similar to other telecom companies, Reliance had a dismal 4th quarter in 2016, and reported a total loss of INR 966 crore. This was compared to profits of 90 crore in Q4, last year. The Anil Ambani led company has been putting this down to the offers and discounts it was forced to concede in response to its peers.