Reliance Info Provides Rs 435 Cr For Bad Debts

[Greens 21]

Reliance Info provides Rs 435 cr for bad debts

R SRIRAM & RAJESHWARI ADAPPA THAKUR

TIMES NEWS NETWORK[ SATURDAY, MAY 01, 2004 12:15:53 AM ]

The Economic Times Online

MUMBAI: Reliance Infocomm, largely responsible for a loss of Rs 390 crore in '04, has made a provision of Rs 435 crore for bad debts, industry sources said. The company posted an earnings before interest depreciation and tax (EBITDA) of Rs 595 crore and a cash profit of Rs 160 crore.

After providing Rs 550 crore towards depreciation, the company posted a loss of Rs 390 crore, as reported by ET on Thursday. Further details such as revenue and expenses were unavailable.

Reliance sources denied these figures, saying that the bad debt figures were in line with the industry average. 'We have not shared our figures with anyone else so far,' said company sources. Reliance Infocomm announced earlier that it had made a cash profit, but details have not been released. 

Reliance Infocomm's bad debts have been a matter of speculation in the telecom industry. The company ramped up its subscriber base during its 'Monsoon Hungama' offer last year, when it offered a connection and a handset for the entry price of Rs 501.

The offer seemed lucrative and Reliance Web World shops across the country were swamped with eager customers. However, many subscribers were unaware of monthly subscription details such as rentals and connections for the phone. Industry sources said that subscribers, who could not afford monthly payments or were just not used to the idea, chose to default, leading to bad debts for the company. They then discovered that that their bills were higher than what they had expected.

Reliance Infocomm has insured the handsets, so the company's loss is estimated to be quite low.

The company also faced problems with phoney subscriber addresses, which industry experts said, is a common problem for all telecom companies initially.

Reliance Industries (RIL) owns 45% of Reliance Infocomm and has invested about Rs 12,000 crore in the company. On Thursday, Anil Ambani, vice-chairman & MD, RIL, said the company would not be investing any more money in Reliance Infocomm. 'Infocomm will raise its own resources through internal generation or debt,' he said.

© Bennett, Coleman and Co., Ltd. All rights reserved.

Edited May 1, 2004 by Chirag