2017 was the best of times and the worst of times for Reliance ADAG Chairman Anil Ambani. On one hand, his debt-ridden flagship company - Reliance Communications (RCom) - was forced to exit the wireless telecom business, while on the other hand, his executives were finally cleared of all wrongdoing in the 2G scam case. Here's a look at the impact that these two events will have on his fortunes, and his game plan for the future.
"For 10 years, 40 quarters, RCom showed EBIDTA (earnings before interest, taxes, depreciation, and amortization) growth, revenue growth, declared dividend, and then landscape changed in Indian telecom sector," Ambani told The Economic Times in his first media interview in 10 years.
He had inherited the telecom business of the Reliance Group following the division of the family empire between the two brothers in 2005. But, with the non-compete clause in the agreement coming to an end, elder brother Mukesh made a dramatic entry into the telecom sector in 2016 with Jio and shook up the industry with his disruptive pricing. Unable to cope with Jio's promise of free voice calls and data on dirt-cheap prices, RCom's number of subscribers reportedly dwindled to 14 million in December 2017, from 120 million a year earlier. At RCom's annual general meeting in September last year, Ambani had said that "the wireless or mobility sector, from any dimension you look at, is in the ICCU. It is not in the general ward, it is not in the ICU, it is in the ICCU", adding that the market is "potentially" moving towards limited competition, perhaps even a monopoly with Jio's entry.
Faced with a massive debt of Rs 45,000 crore crippling RCom, Ambani decided to exit the consumer telecom space as part of its asset monetisation plan. On patriarch Dhirubhai Ambani's 85th birth anniversary, the Ambani brothers signed an agreement under which Jio acquired 122.4 MHz of RCom's spectrum along with all its telecom towers, optic fiber cable network and media convergence nodes reportedly for Rs 24,000-25,000 crore. Anil Ambani had earlier announced that the proceeds of this deal would go to repay much of RCom's debt. The RCom stock rose up nearly 35 per cent a day after the deal was announced.
Under the new debt revival plan, upon completion of all transactions, the balance debt in RCom is expected to be Rs 6,000 crore, a reduction of over 85 per cent of total debt, according to the company. Ambani expects full debt resolution by March 2018, which is good news for the beaten-down stock.
On December 21, 2017, Special CBI Judge OP Saini acquitted all the accused in three separate 2G scam cases lingering in courts for six years. And the Reliance ADA Group was, finally, vindicated. "No individual or corporation should undergo this humiliation, slander, damage to individual and corporate reputation," Ambani said to The Economic Times.
To remind you, in its charge sheet filed in 2011, CBI had alleged that Reliance ADA Group, which included Reliance Telecom, had made an alleged investment of over Rs 990 crore in Swan Telecom (STPL), through a "circuitous route" when the latter applied for 2G licences in 14 telecom circles across India. Reliance ADA Group Managing Director Gautam Doshi along with senior executives Hari Nair and Surendra Pipara were arrested and Ambani had been roped in as a prosecution witness.
"I am a net loser since 2008," he had said a statement given to the CBI in 2011. He was not exaggerating. The share price of RCom, which hovered close to the Rs 800 mark in late 2007, has tanked steadily in the past decade to a low of Rs 10.10. It has only seen a revival in the past one month. In contrast, the S&P BSE Sensex has gained nearly 126% during this period.
Though Ambani has said that it is "premature to talk of any action" regarding seeking damages from the government, he might decide to take his cues from Videocon Telecommunications, which is reportedly planning to file a compensation claim for Rs 10,000 crore from the government.
The road forward
In his recent interview, Ambani said that "the new RCom will be stronger and be India's largest B2B business". Over the years, RCom has built other businesses that contributed about 35 per cent to its revenues as of June 2017. These include cloud, undersea cables, India enterprise business, data centres and direct-to-home services. According to him, with marquee companies like Facebook, Yahoo!, Amazon and Alibaba coming to India and buying space in data centres, there's a huge growth opportunity and this trend is to continue. As he told the daily, "IDC (international data centres) business is set to explode. There is huge opportunity and as opportunity for India grows with $400 billion in reserves and good ratings, we will grow as well."
with PTI inputs