Am­bani broth­ers sign $2.1bn tele­com deal

Enterprise - - SNAPSHOT -

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.

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