Reliance is one of the most known names of the business world in India but there's a stark difference between Mukesh Ambani's Reliance Jio and Anil Ambani's Reliance Communications.
Reliance is one of the most known names of the business world in India but there’s a stark difference between Mukesh Ambani’s Reliance Jio and Anil Ambani’s Reliance Communications. When India’s one of most successful businessmen, Dhirubhai Ambani, who created Reliance Industries from the scratch, died without leaving a will, his two sons Mukesh Ambani and Anil Ambani got involved in a battle to inherit his vast business empire.
In 2005, Dhirubhai Ambani’s wife, Kokilaben brokered a truce between the two. As a result, Mukesh Ambani got hold of the flagship oil refining and petrochemicals, while Anil Ambani got power generation and financial services. Along with it, the younger Ambani also took over the telecom unit, which is now known as Reliance Communications. In December 2015, Mukesh Ambani launched his own telecom company under the conglomerate Reliance Industries known as Reliance Jio Infocomm.
Reliance vs Reliance
In nearly three years, Reliance Jio became the second biggest telecom company by subscriber number, while RCom barely marked its presence. As on August 31, 2018, the total telecom wireless subscriber base in India stood at 116.69 crore, of which Reliance Jio had 20.5% share, while RCom had a mere 0.004% share, Care Ratings report showed.
Caption: Chart: Care Ratings/TRAI
“It is to be noted that the market share scenario was very different two years back in 2016 when Reliance Jio had not entered the telecom market,” the rating agency said.
“The tremendous rise in the broadband subscriber base was mainly driven by cheap data services offered by Reliance Jio which, in turn, also compelled other telcos to reduce their data charges in order to retain their market share,” it added.
The story so far…
At that time, oil business was under stress as prices were headed above $60 a barrel but telecom business was hailed as the future. Until 2010, Mukesh Ambani was kept out of telecom business due to a non-compete clause signed between the brothers.
But as soon as Mukesh Ambani entered the telecom market with his ultra-cheap services, not only did it hurt other companies but RCom too. Mukesh Ambani pumped more than Rs 2.5 trillion ($34 billion) to build a speedier 4G wireless network.
Unlike Mukesh Ambani, Anil Ambani spent billions too but the younger brother did not have a cash cow like oil refinery to finance growth, Bloomberg said in a wealth profile story of the Ambani brothers.
It led to a pile of huge debt which he struggled to pay back. Ultimately, RCom signed a spectrum sale deal with Jio to repay the debt of Rs 45,000 crore. At the 14th annual general meeting in September this year, Anil Ambani announced that RCom will be completely exiting the telecom business.