Big brother, poor RCom

Mukesh Ambani-led Reliance Jio has officially become the fourth largest telecom operator in terms of subscribers, according to data released by TRAI.

The operator added 58.39 lakh customers in March alone, accounting for 9.29% of the total 1.17 billion wireless subscribers in India as of March 31, 2017.

His brother Anil Ambani-piloted debt-laden Reliance Communications, however, reported its first full-year loss since inception of ₹1,796 crore in 2016-17. Reliance Communication, which has run up a debt of ₹43,000 crore, was hit hard by a combination of free offers by Jio and disruptive pricing in the telecom industry.

Thanks to Reliance Jio, which has shaken the telecom market with its aggressive entry last year, Reliance Communication had to contendwith just 7.14% market share as the company lost 2.77 lakh subscribers in March alone.

The numbers tell a tale of their own. While announcing the ‘'virtual merger’ of Reliance Communications with Reliance Jio at the annual general body meeting of the shareholders of Reliance Communications last year, Mr. Anil Ambani, perhaps, expected this to be a win-win situation. Mr. Anil Ambani anticipated that the ‘virtual merger’ would lead to potential synergies and enormous cost savings as both firms entered into a series of sharing agreements — from optic fibre to telecom towers and spectrum. Reliance Communications, in January last year, had sold spectrum in nine circles to Reliance Jio for over ₹4,000 crore and agreed to share spectrum in another 17 circles. It entered into optic fibre and tower-sharing deals with Reliance Jio, leading to anticipated saving of ₹12,000 crore. “There are two committed brothers — Mukesh Ambani and Anil Ambani — and both working relentlessly to fulfil the dream of Dhirubhai Ambani,” Mr. Anil Ambani had said during the AGM.

However, Reliance Communications not only reported its maiden full-year loss since inception, but is all on the verge of default as some of the lenders have categorised loans to the company under ‘Special Mention Account.’ “All this synergies and cost savings sound good on paper, but that fact is that Reliance Communications has lost business to Reliance Jio,” Sanjiv Bhasin, executive vice-president, (Markets) at IILF, told The Hindu.

Reliance Communications has, in the meantime, sought time till September 25 from lenders for repaying ₹25,000 crore. “

The survival of Reliance Communications depends on the two deals to sell half of its wireless telecoms business to Aircel and 51 per cent of its towers unit to Brookfield of Canada. “Reliance Communications is on the verge of default unless the merger happens with Aircel. The merger with Aircel looks difficult due to controversies surrounding Aircel promoter. Anil Ambani is pushed against the wall, and it’s a losing battle,” said Mr. Bhasin.

Credit rating agencies ICRA, CARE and Moody’s had already downgraded RCom ratings on fears that competition from Jio could impact its profitability and revenue-generating capacity.

Reliance Communications shares hit a 52-week low of ₹18.15 before closing down at ₹20 on Wednesday, valuing the company at ₹4,978 crore. The stock has lost 99% of its value since the high of ₹820 in 2008.

Will elder brother Mukesh Ambani, with investments exceeding ₹1.5 lakh crore in Reliance Jio, play the white knight for younger brother Anil by bailing him out of the crisis? That remains to be seen.

After all, Reliance Communications was Mukesh Ambani’s baby, which went to Anil Ambani after the de-merger of the Reliance empire on June 18, 2005.

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Printable version | Jul 5, 2022 11:34:26 pm |