RJio-RCom Pact: Because ‘Bhaichara’ is the Best Policy!

It was an emotional moment for Mukesh Ambani, to give up the telecom business, Reliance Infocomm, which he had built from scratch, to brother Anil Ambani, way back in 2005, when both the brothers parted ways.

But Mukesh Ambani, Chairman, RIL and also the driver behind Reliance Jio (RJio), showed his passion for telecom by launching Reliance Jio last year and adding about 160 million subscribers within over one year of launch.

And now the RJio and Reliance Communication (RCom) pact, which was announced yesterday, is a cherry on the top for the big brother as the deal is going to play a key role in its massive roll out of wireless, fiber-to-Home and enterprise services.

The deal comprises of 122.4 MHz of 4G Spectrum, over 43,000 towers, 1,78,000 kilometres of fiber and 248 media convergence nodes.

For RCom, it would significantly pare its debts and help to come out of the woods. Since the beginning, RCom had been wading through troubled waters.

While the telecom business was one of the best profit making businesses before the de-merger, it started dwindling over the years with intense price wars and over-crowded capacity of the sector.

RCom was also impacted on account of recession and alleged charges by Department of Telecom of misallocation of revenues in its accounting practices.

RCom’s woes shot up this year after its deal with Aircel was called off. The deal would have empowered RCom with fair spectrum holding, market share, subscribers’ base and network coverage. The deal would have given a respite to RCom, which was riding on Rs 45,000 crore debt. In fact, China Development Bank had filed an insolvency petition in the bankruptcy court to recover about Rs 11,460 crore from RCom.

RCom was reeling under tremendous pressure owing to falling subscribers base, revenues and ARPUs. The company had lost about 38 million subscribers between 2015 and 2017.

However, RCom’s bleak future is likely to see a turnaround with RJio deal and strategic debt restructuring.

After all these, while Anil Ambani would be relieved, for Mukesh Ambani it would be another opportunity to ‘Kar lo duniya muthi mein’.