Will Laurel and Hardy continue to fight, or will they make up?Sanjana Ray
Everyone knows that the Ambani brothers don’t exactly have the healthiest relationship. In the past, if one would launch, buy or present a scheme or idea, the other would hop, skip and jump to do one better; and the battle continues. Or does it?
The recent announcement made by Anil Ambani regarding the merger of his Reliance Communication Ltd. with Maxis Communication Berhad’s Aircel was made a mere fortnight after his elder brother Mukesh Ambani’s launch of the much-awaited and anticipated Reliance Jio.
According to DNA, this anticipated merger will witness a telecommunication service with a rough 186.7 million (9.87 million of RCom and 8.80 million of Aircel) subscriber base, coming third behind Bharati Airtel’s 251 million and Vodafone India’s 198 million. The new entity, which will possibly soon be rebranded and renamed, will witness a 50-50 ownership share between Anil Ambani and Aircel’s parent company, the Malaysian Maxis Communications Berhad.
At the same time, Mukesh Ambani’s game-changer, Reliance Jio, expects to have about a 100 million subscriber-base in the shortest time, while catapulting in 40 million subscribers by the next fiscal, according to Morgan Stanley.
The timeline of the announcement seems a tad coincidental, keeping in mind the Ambani’s history. According to the Business Insider, some analysts were to suggest that it was the threat of Reliance Jio’s potential that prompted Reliance Communications to buy Russian conglomerate Sistema’s mobile business. With the recent merger with Aircel, Reliance Communications seems to have a greater advantage of ruling the Indian telecom sector in lieu of its wide reach and available network and cables.
“Together with our partners, MCB, we are delighted to have taken the lead in consolidation of the Indian telecom sector, first, with RCom’s acquisition of the wireless business of SSTL (Sistema / MTS), and now, with the combination of our business with Aircel Ltd. in a 50:50 Joint Venture with MCB,” said Anil Ambani in a public speech, regarding the launch.
However, the RCom-Aircel merger seems to be heading more towards favouring RJio than offering it competition. Back in 2005, the Ambani brothers had formally announced their intentions of ‘assisting’ each other in their telecom ventures, and in January of this year, the two companies signed a deal to share RCom’s 800 MHz spectrum for its 4G push.
“This strategic cooperation and partnership between RJio and RCom is a virtual consolidation in the telecom sector, and I’m grateful to my elder brother Mukeshbhai for unstinted support and guidance,” Anil Ambani had said at the last annual general meeting.
For now, that seems to be going the right way indeed. According to Business World, this agreement would allow RCom’s customers to access RJio’s ‘asset light’ and ‘minimal capital expenditure’, while RJio would get access to RCom-Aircel’s subscriber base of millions, seemingly the third largest in the country. All this while, one of the biggest problems that RJio was facing was the challenge of gaining access to potential subscribers and high-data users and convincing them to shift over from their existing service providers. Now with this agreement, they will be able to procure a much larger number of subscribers to their network, considering both RCom and MTS have their roots in CDMA. It will also make RJio the only player in the market with 2G, 3G and a nationwide 4G LTE network.
This mutual benefitting agreement is receiving its fair share of confidence by analysts like Deepak Kumar, Founder Analyst at BusinessandMarkets, who states that “It is definitely positive for RJio as it will get access to a huge subscriber base.” However, for the old-schoolers like Airtel, Vodafone India and Idea Challenge, this new entity isn’t a bit favourable to them, to say the least.
The same report by DNA proclaims that the merger deal made the new entity the second-largest spectrum holder in the country at 451 MHz across 850 MHz, 900 MHz, 1800 MHz and 2100 MHz frequency bands, earning them a place among the top four players in terms of customer base and revenues.
For now, the Indian Telecom Sector seems to be under the reins of the Ambani brothers. According to Maxis Communication Berhad, which acquired ownership of Aircel in 2006, “The deal and further equity commitment underpinned its belief in the long-term growth potential of India and India's telecom sector.”
Now the question is, will this truce hold, leading to a possible merger of RCom and Rjio or will it be a Battle of the Ambanis 2.0?