Ambani brothers sign $2.1bn telecom deal
Brothers Mukesh and Anil Ambani fought a bitter battle for control of Reliance, one of India’s largest listed companies, which they inherited from their father. They split it into two in 2005, a move that did little to forestall years of furious regulatory and media battles.
The billionaire brothers have now unveiled a $2.1bn agreement to share a telecom infrastructure between their respective companies, a pact marking the culmination of one of Asia’s most prominent corporate feuds. The new deal signals a continuation of the rapprochement between the two brothers.
Mukesh Ambani formally joined Reliance Industries, a conglomerate founded by his late father, in 1981 and worked at different levels, gradually rising to the highest position. He took the company from textiles to polyester fibres and further into petrochemicals, petroleum refining and later going all the way into oil and gas exploration and production. In 1983, Anil joined Reliance as Co-Chief Executive Officer. Under his leadership, Reliance has raised around US$2 billion from the overseas financial markets, since 1991. The 100-year Yankee bond was launched under his leadership.
Mukesh Ambani had also set up Reliance Communications Limited, one of the largest and most complex information and communications technology initiatives in the world. Today, as the Chairman and Managing Director of Reliance Industries, his net worth is estimated at US $27 billion. The two Ambani brothers took the Reliance Group to great heights and due to their efforts and intelligence, it enjoys its current status as India’s leading textiles, petroleum, petrochemicals, power and telecommunication company.
The brothers have been on better terms more recently and have also signed a pact to lease telecom towers to Reliance Jio Incomm, the fourthgeneration telecom business to be launched by the elder brother’s cashrich Reliance Industries. The initial telecom agreement was small in value – involving a fibre-optic cable-sharing contract worth only $221 million. Investors welcomed the prospect of a cash inflow to service the company’s Rs360bn ($6.6bn) of net debts and open prospects for further deals between the two men in future.
The two co companies, in a joi joint statement, sa said that under the terms of the ag agreement, Mukesh Am Ambani’s nascent 4G operation will us use some portion of his brother’s gr ground and rooftopba based telecom to tower network c comprising 45,000 u units. The release p provided few details o on the nature or ti timescale of the deal but analysts said that assuming it was signed over an industry-standard 15-year period, its terms appeared to favour the elder brother. Mukesh has repeatedly attempted to off-load these assets in recent years with a series of abortive floatation and stake sale plans, which RCOM now hopes to revive in the aftermath of these deals.
A telecom expert at a Mumbaibased financial institution, who spoke on condition of anonymity, said, “Compared with what we were expecting this is quite disappointing.”
“In the first deal they [RCOM] got cash up front and sold capacity at the market rate, but here there is no cash, and the deal seems to be at about a 50 per cent discount to the market rate. So it looks like Mukesh drove a hard bargain.”
Even so the deal raises hopes that Anil Ambani may now be able to move ahead with plans to raise fresh capital by selling all or part of his telecom towers business later this year.