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Breaking News : Reliance Communications to shift 5-million CDMA users to 4G
Reliance Communications will upgrade its roughly 5 million CDMA customers to a 4G network in phases from May 4, joining bigger rivals Bharti Airtel, Vodafone India and Idea Cellular in rolling out high-speed broadband services.

The plan was revealed on the day ratings company Moody's Investors Service downgraded RCom's outlook to negative from stable, citing delays in the sale of its non-core assets, sending shares of the telco lower.

RCom has been trying to cut about Rs 40,000 crore of debt by selling its tower and optic fibre network and merging its wireless assets with Aircel, both of which have been delayed beyond their initial timelines.

However, Moody's noted that RCom's spectrum sharing and trading pacts with Reliance Jio Infocomm and the imminent completion of a merger with Sistema Shyam Teleservices were positive developments in the past three months.

"We will be upgrading our network from CDMA to LTE (a 4G standard) technology," the Anil Ambani-owned telco said in an April 4 letter to the telecom department. "We would be rolling out LTE services progressively in these service areas from May 4 and necessary intimation will be provided to our existing CDMA subscribers."

RCom will leverage its spectrum sharing pact with Reliance Jio and use its infrastructure to launch 4G services.

People familiar with the plan said RCom will initially roll out the upgrade in Haryana, Punjab, Himachal Pradesh and Odisha, followed by the more lucrative circles of Mumbai and Delhi, and intends to complete the process by August 15.

"RCom has already started intimating subscribers in the four circles that they can upgrade from May 4. It could also offer bundled 4G devices under various instalment schemes to those who don't have 4G handsets," one of the people said.

An industry expert cautioned that moving subscribers from CDMA to 4G may leave them vulnerable to poaching from stronger rivals.

Moody's said that while the benefits of the spectrum agreement will start accruing to RCom with the transition of its CDMA subscribers to LTE, meaningful financial and operational gains will come in only when Jio starts commercial services. Jio is expected to soft launch 4G services this month, with wider commercial operations likely to start around December.

RCom had signed a 17-circle airwave-sharing pact in the 800 MHz band with Jio. It also agreed to sell 800 MHz spectrum to Jio in nine service areas where the Mukesh Ambani company does not have airwaves in this band.

"There is unlikely to be a material improvement in leverage, as well as associated liquidity and refinancing pressures over the next 6-9 months, even if the company (RCom) announces a binding tower sale transaction this quarter," said Nidhi Dhruv, Moody's vice president and senior analyst.

It expects the valuation of RCom's tower assets to be 20-25% lower than its earlier estimate of $3.4 billion.

The ratings company said upon completion of the share-swap transaction with Sistema Shyam Teleservices, RCom will have adequate spectrum and added that if the telco participates in the upcoming spectrum auction, its leverage metrics will be further pressured.

There is also the need to refinance upcoming debt maturities, including $450 million in debt falling due in the quarter ending June 30. "This includes a $350 million ECB facility at Reliance Infratel, which is guaranteed by RCom and has a cross-default with other debt," added Dhruv.

Reliance Infratel operates the towers business. Had the tower transaction closed within the original planned timelines, proceeds from the sale could have been used for debt repayments.

RCom shares fell 1.5% to Rs 50.20 at the close on the BSE, underperforming the broader market.
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