Reliance Jio has written down Rs 12,000 crore on spectrum for the FY16. This is the first case where an Operator has written down such a huge amount even before launch of its services.
Companies write down an asset to reduce its value or offset a loss or expense. A write-down becomes a write off if the entire balance of the asset is removed from the books altogether.
Reliance Jio acquired spectrum through an auction in 2010. It launched its commercial services only in 2017. Spectrum is allotted for a period of 20 years. This means that the company didn’t earn any revenue for more than six years. Generally, the companies either book losses on yearly basis or amortise the value over remaining years. Reliance Jio preferred to write down the value of the spectrum.
Reliance Jio has already invested Rs 2 lakh crore on the project. Its equity is Rs 70,000 crore. According to a J P Morgam report, the company will turn PAT positive from year 4.
As of March 31, it had a subscriber base of 108.9 million subscribers, out of which 72 million were under its prime membership.