The Telegraph
Tuesday , June 24 , 2014
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Moody’s Jio tone cautious

Mumbai, June 23: Global credit rating agency Moody’s expects Reliance Industries to invest up to Rs 30,000 crore over the next two years in its telecom business but warned funders that any exposure would be credit negative.

Reliance is set to launch its fourth generation (4G) telecom services through Reliance Jio (RJio) in the next calendar year in a phased manner. Addressing shareholders at its annual general meeting recently, RIL chairman and managing director Mukesh Ambani had disclosed that the company would spend close to Rs 70,000 crore in the telecom business.

“Based on RIL’s March 2014 annual report, we estimate that it has already invested about Rs 40,000 crore in Reliance Jio, and we expect RIL to invest the next Rs 30,000 crore in the company over the next two years,” Moody’s Investors Service said in a statement.

Moody’s, however, warned that the investment would be credit negative as Reliance Jio would not generate any EBITDA (earning before interest, tax, depreciation and amortisation, an indicator of cash flows) for at least the next 12 months.

It said the entry of Reliance into the highly competitive telecom sector was credit negative for existing players such Bharti Airtel and Vodafone India because “it will undoubtedly result in intensified competition that will lead to declines in average revenue per user and margins”.