RCom to shut 2G biz; forces users to shift to 4G; 1k employees may be axed

Move comes a day after the beleaguered company said it was shutting down its direct-to-home TV business

Anil Ambani-led Reliance Communications (RCom) has asked 60 per cent of its 81 million customers to migrate from using second generation (2G) services to 4G services, as it was shutting down the 2G business. This comes a day after the beleaguered company said it was shutting down its direct-to-home TV business.

The company has also asked around 1,000 employees to leave by the end of November. 

According to a company official, 60 per cent of its customers are still using the outdated 2G technology, which is not viable to service with technology upgrade adopted by all players. The company had earlier adopted a similar strategy in other parts of India to churn out low-value customers. 

When contacted, a spokesperson said, as announced earlier this month, the company decided to adopt a 4G-focussed 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 November 30. The company’s 4G-led strategy will be executed, as at present, on the back of capital-light access to India’s most extensive 4G mobile network, through already operational spectrum-sharing and ICR (intra-circle roaming) arrangements with Reliance Jio.”

With Jio offering free voice services, and Bharti Airtel and Vodafone-Idea upping their own service standards, the fate of 2G services of smaller players was sealed. RCom is not alone in its misery.

Tata Teleservices recently announced that it had offered its entire wireless telephony business to Airtel for free and is exiting the business.

RCom is in the midst of implementing a strategic debt restructuring plan for its Rs 45,733-crore debt, with lenders agreeing to convert part of their loans to equity by December. In June, RCom had signed a standstill agreement with banks, under which it need not pay any interest or principal amount to banks till December 2018. 

In September last year, it had agreed to merge its wireless telephony business with Aircel that would have reduced almost half of its debt. Post the Aircel merger, it was also to sell its telecom towers to Brookfield for Rs 11,000 crore. But the lifeline merger transaction collapsed following delay in getting approvals from the courts and other authorities such as the department of telecom. The Brookfield deal also failed to close, thus, thwarting its efforts to turnaround operations.  Lenders said they would keep in mind the current market price as and when they would take a call on converting part of their loans into debt. RCom shares closed at Rs 16.45 on Wednesday, losing almost 52 per cent of its value since January this year. As a result, the company’s market value crashed to Rs 4,001 crore from Rs 8,475 crore as on January. As per an annual general meeting notice to shareholders, banks were to convert their loans at Rs 25 a share.