My dear fellow Shareowners,
Under the leadership of Hon'ble Prime Minister, Shri Narendra Modi, the Indian economy
has continued its high growth momentum. According to the International Monetary Fund,
India is forecast to grow at 7.4% in 2018, making us the fastest-growing economy in the
world. Series of new initiatives initiated by the Government have moved India into world's
top countries towards ease of doing business. The global economy is also growing at its
fastest pace and expected to strengthen further in years to come. The Indian telecom
sector saw significant challenges for the most part of Financial Year 2017-18, as free
voice calls and ultra-cheap data access saw operators forcibly rein in tariffs.
Hyper-competition in the sector brought significant disruption and impacted the sector's
operational and financial health. As evident from the latest sector revenue report
released by the TRAI, the wireless sector continued to be on a downward spiral, with more
than 21% revenue decline on Year-on-Year basis and revenue market size contracting by over
26,000 crores on an annualized basis. As a result, all operators' financial performance,
including your Company, was adversely impacted for the second year in a row. The Company
exited the wireless B2C business on January 31, 2018.
Your Company is actively pursuing an asset-light strategy with focused execution of
various consolidation and asset monetization initiatives. During the year and in the last
few months, your Company has made steady progress in execution of these transactions:
Strategic Corporate Transactions
RCOM's acquisition of Sistema Shyam Teleservices
Limited - the first consolidation in the Indian telecom sector
The Board of Directors of the Company on October 31, 2017, took on record the merger of
Indian telecom business of Sistema Shyam Teleservices Limited (SSTL) in to the Company and
allotted equity shares to the tune of 10% of the equity shareholding of the Company to
SSTL.
Debt Restructuring and Asset Monetization Plans
As stated, the challenges being faced by the telecom sector have resulted in
industry-wide muted growth in revenues, stagnant margins and free cash flows. This
impacted the Company as well, leading to a default on debt servicing obligations. After
due deliberations, the Company and its two subsidiaries lenders on June 2, 2017
constituted a Joint Lenders' Forum and invoked the SDR Scheme in accordance with the
guidelines issued by the Reserve Bank of India.
Subsequently, RCOM has taken significant steps to reduce debt and improve long-term
sustainability. We closely worked with the lenders to monetize many of our assets, such as
wireless spectrum, towers, fiber, media convergence nodes (MCNs) and sundry real estate.
Dhirubhai Ambani Knowledge City (DAKC) campus in Navi Mumbai is planned to be developed
under fintech policy of Govt. of Maharashtra. The Company plan to develop 30 million
sq.ft. of commercial space over next 10-12 years and lease it to corporate and commercial
establishment. The proceeds of this asset monetization will be used to repay debt and
reduce liabilities. RCOM expects to complete this monetization plan by last quarter of
2018, thereby achieving overall significant debt reduction from this first phase of the
asset monetization plan.
Operating Segments
Following the closure of B2C wireless business, Reliance Communications Limited (RCOM),
is now a pure-play enterprise telecommunications service provider at the forefront of
enabling a digital revolution across India and globally, with a sharp focus on the
Emerging Markets of Asia-Pacific and the Middle East. RCOM is no longer affected by the
severe and prolonged wireless sector hyper competition.
RCOM conducts a substantial portion of its business through subsidiary companies,
including Global Cloud Xchange (GCX), Reliance Communications Infrastructure Limited
(RCIL) and Reliance Infratel Limited (RITL). RCOM together with its subsidiary companies,
is a proven leading global communications services provider, with businesses including a
vast global subsea cable business; a global on-Net Cloud ecosystem; extensive India and
global enterprise business; India Data Center business (IDC) and the India National Long
Distance (NLD) business. RCOM already owns the very fabric that will deliver the next
generation of applications and services to Enterprises, Carriers, OTTs and Government
entities. The highly valuable assets in your Company comprise extremely difficult to
replicate infrastructure including the global subsea cable system connecting 27 countries,
pan-India Intercity and Intracity terrestrial fiber optic network, one of the largest data
center footprints in India and a global managed services delivery platform catering to
leading multinational companies.
As a pure B2B player, RCOM is best positioned to capture disproportionate market share
in the fast growing enterprise data and data center market in India and will reimain
focused on: 1. stable enterprise communications services and the rapidly growing data
center space in India.
2. global subsea cable business in enterprise data across continents, with over 300
enterprise and carrier customers worldwide.
3. serve approximately 35,000 customers worldwide vis--vis 12 crore customers
inclusive of B2C earlier; 4. employ approximately 3,400 employees vis--vis peak of
52,000, a reduction of 94%. With above focus, RCOM operational business will remain fully
insulated from the hyper competition, mega capex requirements, financial stress of the
wireless sector. Going forward, investments in improving network and spectrum efficiency,
network coverage, content, Cloud, virtualization and analytics will drive revenue growth
and profitability.
Performance review
The key financial highlights for the year under review on a consolidated basis are: Total
revenue of 4,684 crore (US$ 719 million) Total EBITDA of 899 crore (US$ 138
million) Net loss after tax of 24 crore (US$ 4 million) Total assets of
74,578 crore (US$ 11,443 million) Shareholders equity was 2,783 crore (US$ 427 million)
while the net debt (excluding cash and cash equivalent) was 46,470 crore (US$
7,130 million), giving a net debt to equity ratio of 16.7 times.
Reliance Group
Reliance Communications Limited, is a constituent of the Reliance Group which is a
prominent business house, widely recognized in India and abroad as one of the leading
creators of projects of national importance in infrastructure, power generation,
transmission & distribution, financial services, defence manufacturing, entertainment
and telecommunications, amongst others.
The Reliance Group has the largest investor base in India with over 15.5 million retail
investors. Reliance Group has over 75,000 employees and serves over 200 million customers.
The Reliance Group has assets under management of over 4.5 lakh crore and also manages
Government of India's Employees' Provident Fund Organisation (EPFO), Pension Fund
Regulatory and Development Authority (PFRDA) and Coal Mines Provident Fund Organisation
(CMPFO) Funds.
Currently, the Reliance Group has assets worth 3,50,000 crore, net worth of 70,000
crore and cash flows of over 21,000 crore.
Our Commitment
We are confident about the growth outlook of the Indian telecom sector and the
opportunities for your Company in the enterprise data and data center market, despite the
high levels of competitive intensity presently being observed. Our founder, the legendary
Padma Vibhushan Shri Dhirubhai H. Ambani, gave us a simple mantra-"To aspire to the
highest global standards of quality, efficiency, operational performance and customer
care". We remain committed to upholding that vision and creating greater value in the
long term for all our stakeholders.
Anil Dhirubhai Ambani
Chairman