How can people trust the harvest unless they see it sown?
For the business tycoon Anil Ambani and the Chairperson of Reliance Group, the
seeds of mistrust were sown in such a white-collar fashion that he could judge
that the harvest for it would be so faulty, it would do him more loss than it
would do him any good. Anil was once a proud owner of a flourishing telecomm
business named Reliance Communications. At
that time, the empire lying in wait to be built by Anil with the soon
burgeoning telecom stretched out a couple of billion dollars at the time in the
form of revenues with a net income of say approximately $7 million, but one may
contend here that the business was still in its nascent stage.
One would imagine that with a fast-growing and liberalising
India with an incessant longing for electricity and cheap communication, Anil
couldn't really lose. But the only quandary over here was more like his other
businesses, were capital hungry. R-Com, nonetheless, didn’t take much time to
spring out to be India’s second largest telecom company, but at the same time
it was engaging in massive spends keep with competitors, which meant piling on
more debt. But that wasn’t the only problem that it was staring at. The R-Com
that Mukesh had started and later inherited by Anil chose CDMA technology as
opposed to the prevalent GSM that the market was adopting. It had a telling
impact on Anil's R-Com. As per the experts, the decision was fraught with risks
since CDMA technology was that it only supported 2G and 3G, while 4G was to be
introduced in India in the near future. And unlike Jio, which is a subsidiary of
the cash rich Reliance Industries, RCom under Anil Ambani was a standalone
company, with too much debt and poor quality customers. Nonetheless, the
company introduced its GSM service in 2008. And On January 10, 2008, RCom sent
out messages on mobile phones of customers and journalists to announce what it
considered was one of its biggest achievements. The company's scrip, which
listed at Rs 307 on March 6, 2006, had touched Rs 844.70 that day, taking its
market capitalisation to an all-time high of Rs 1,65,917 crore. But later R-Com
continued to pump up losses and Anil went on with the hope that time would
allow for situations to bounce back. In 2010, in the spectrum auction, Reliance
obtained licenses for 3G spectrum in three cities at a total licensing fee of ₹
58,642.9 million. But while during this time Anil's businesses tacked on more
debt, he went along with something that he probably regrets even to this day.
In a show of family unity, Anil and his brother decided to do away with their
non-compete clause. In retrospection Anil could not have known what would
follow. In fact, the non-compete had effectively caused a huge deal between
Anil's R-Com and South Africa's telecom leader MTN in 2008 to be cancelled
since Mukesh chose to trigger his right of first refusal, causing Anil to lose
$30 billion of his net worth as R-Com's stock plummeted by almost 50% between
July and November 2008. The deal could have transformed Anil's R-Com into a real
global player. Anil did not know it at the time but he had just allowed the
wolf into his den. Mukesh commenced silently. In 2011, he acquired a pan-Indian
license for 4G spectrum data transmission ostensibly for high speed internet
transmission.
It was all very convenient for Mukesh because he got
everyone thinking that he was just interested in the internet broadband
business but as he began to build his empire, buying certain spectrum here,
striking deals for a voice component or towers there a clearer picture started
to surface. Before one could know, Mukesh ended up spending close to a
staggering $40 billion on the back of his cash-rich oil and petroleum business
for a pan-India telecom network with voice and data called Jio. It destroyed Anil's
RCom practically overnight and shook up all other incumbents-Airtel, Vodafone,
and all the others. Everyone suffered from the carnage that Jio created with
its free voice calls for life and dirt-cheap data in a country that was once
the most expensive in the world. Companies collapsed like houses of cards
during this overwhelming price war.
And consequently, R-Com suffered tremendously during this
period. With its massive debt, Anil's company had no chance of surviving this
hullabaloo and was almost instantly put on life support. Yet Anil keeping his
due diligence intact, decided to not to proceed in the sector in 2018 and
started off paying the debts by selling his other business assets. He later
declared insolvency and sold many prestigious projects that were running under
Reliance Infrastructure.
In conclusion, while Anil had this great vision, it was
mostly his brother nipping in the bud for him that marred his telecom business.
Else the story would have been completely different with Anil leading the lines
of telecom business.
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