My dear fellow Shareowners
Under the leadership of Hon'ble Prime Minister Shri Narendra Modi the Indian economyhas continued its high growth momentum. According to the International Monetary FundIndia is forecast to grow at 7.4% in 2018 making us the fastest-growing economy in theworld. Series of new initiatives initiated by the Government have moved India into world'stop countries towards ease of doing business. The global economy is also growing at itsfastest pace and expected to strengthen further in years to come. The Indian telecomsector saw significant challenges for the most part of Financial Year 2017-18 as freevoice calls and ultra-cheap data access saw operators forcibly rein in tariffs.Hyper-competition in the sector brought significant disruption and impacted the sector'soperational and financial health. As evident from the latest sector revenue reportreleased by the TRAI the wireless sector continued to be on a downward spiral with morethan 21% revenue decline on Year-on-Year basis and revenue market size contracting by over` 26000 crores on an annualized basis. As a result all operators' financial performanceincluding your Company was adversely impacted for the second year in a row. The Companyexited the wireless B2C business on January 31 2018.
Your Company is actively pursuing an asset-light strategy with focused execution ofvarious consolidation and asset monetization initiatives. During the year and in the lastfew 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 ofIndian telecom business of Sistema Shyam Teleservices Limited (SSTL) in to the Company andallotted equity shares to the tune of 10% of the equity shareholding of the Company toSSTL.
Debt Restructuring and Asset Monetization Plans
As stated the challenges being faced by the telecom sector have resulted inindustry-wide muted growth in revenues stagnant margins and free cash flows. Thisimpacted the Company as well leading to a default on debt servicing obligations. Afterdue deliberations the Company and its two subsidiaries lenders on June 2 2017constituted a Joint Lenders' Forum and invoked the SDR Scheme in accordance with theguidelines issued by the Reserve Bank of India.
Subsequently RCOM has taken significant steps to reduce debt and improve long-termsustainability. We closely worked with the lenders to monetize many of our assets such aswireless spectrum towers fiber media convergence nodes (MCNs) and sundry real estate.Dhirubhai Ambani Knowledge City (DAKC) campus in Navi Mumbai is planned to be developedunder fintech policy of Govt. of Maharashtra. The Company plan to develop 30 millionsq.ft. of commercial space over next 10-12 years and lease it to corporate and commercialestablishment. The proceeds of this asset monetization will be used to repay debt andreduce liabilities. RCOM expects to complete this monetization plan by last quarter of2018 thereby achieving overall significant debt reduction from this first phase of theasset monetization plan.
Following the closure of B2C wireless business Reliance Communications Limited (RCOM)is now a pure-play enterprise telecommunications service provider at the forefront ofenabling a digital revolution across India and globally with a sharp focus on theEmerging Markets of Asia-Pacific and the Middle East. RCOM is no longer affected by thesevere and prolonged wireless sector hyper competition.
RCOM conducts a substantial portion of its business through subsidiary companiesincluding Global Cloud Xchange (GCX) Reliance Communications Infrastructure Limited(RCIL) and Reliance Infratel Limited (RITL). RCOM together with its subsidiary companiesis a proven leading global communications services provider with businesses including avast global subsea cable business; a global on-Net Cloud ecosystem; extensive India andglobal enterprise business; India Data Center business (IDC) and the India National LongDistance (NLD) business. RCOM already owns the very fabric that will deliver the nextgeneration of applications and services to Enterprises Carriers OTTs and Governmententities. The highly valuable assets in your Company comprise extremely difficult toreplicate infrastructure including the global subsea cable system connecting 27 countriespan-India Intercity and Intracity terrestrial fiber optic network one of the largest datacenter footprints in India and a global managed services delivery platform catering toleading multinational companies.
As a pure B2B player RCOM is best positioned to capture disproportionate market sharein the fast growing enterprise data and data center market in India and will reimainfocused on: 1. stable enterprise communications services and the rapidly growing datacenter space in India.
2. global subsea cable business in enterprise data across continents with over 300enterprise and carrier customers worldwide.
3. serve approximately 35000 customers worldwide vis--vis 12 crore customersinclusive of B2C earlier; 4. employ approximately 3400 employees vis--vis peak of52000 a reduction of 94%. With above focus RCOM operational business will remain fullyinsulated from the hyper competition mega capex requirements financial stress of thewireless sector. Going forward investments in improving network and spectrum efficiencynetwork coverage content Cloud virtualization and analytics will drive revenue growthand profitability.
The key financial highlights for the year under review on a consolidated basis are: Totalrevenue of ` 4684 crore (US$ 719 million) Total EBITDA of ` 899 crore (US$ 138million) Net loss after tax of ` 24 crore (US$ 4 million) Total assets of `74578 crore (US$ 11443 million) Shareholders equity was ` 2783 crore (US$ 427 million)while the net debt (excluding cash and cash equivalent) was ` 46470 crore (US$7130 million) giving a net debt to equity ratio of 16.7 times.
Reliance Communications Limited is a constituent of the Reliance Group which is aprominent business house widely recognized in India and abroad as one of the leadingcreators of projects of national importance in infrastructure power generationtransmission & distribution financial services defence manufacturing entertainmentand telecommunications amongst others.
The Reliance Group has the largest investor base in India with over 15.5 million retailinvestors. Reliance Group has over 75000 employees and serves over 200 million customers.The Reliance Group has assets under management of over ` 4.5 lakh crore and also managesGovernment of India's Employees' Provident Fund Organisation (EPFO) Pension FundRegulatory and Development Authority (PFRDA) and Coal Mines Provident Fund Organisation(CMPFO) Funds.
Currently the Reliance Group has assets worth ` 350000 crore net worth of ` 70000crore and cash flows of over ` 21000 crore.
We are confident about the growth outlook of the Indian telecom sector and theopportunities for your Company in the enterprise data and data center market despite thehigh levels of competitive intensity presently being observed. Our founder the legendaryPadma Vibhushan Shri Dhirubhai H. Ambani gave us a simple mantra-"To aspire to thehighest global standards of quality efficiency operational performance and customercare". We remain committed to upholding that vision and creating greater value in thelong term for all our stakeholders.
Anil Dhirubhai Ambani