Anil Ambani’s RComm gets a lifeline from brother Mukesh Ambani’s Jio as first phase of asset sale is completed

• In the last week, Reliance Communications has sold ₹50 billion worth of telecom assets to Reliance Jio as part of a plan to reduce debt.
  
• The deals comprise the first tranche of a larger agreement, signed in December 2017, for the sale RComm’s entire fibre and tower network, and most of its mobile spectrum.
  
• The deal is symbolic of the converging fortunes of the two brothers. The price war initiated by Reliance Jio’s entry was the final nail in the coffin for RComm.
  

On 27 August, the Anil Ambani-owned Reliance Communications (RComm) announced that it had completed the sale of ₹30 billion worth of fibre and infrastructure assets to Reliance Jio, which is owned by Anil’s brother Mukesh Ambani. The sale follows a similar one last week, wherein RComm sold its media convergence nodes (MCN) and other infrastructure assets to Jio for ₹20 billion.

The deals comprise the first tranche of a larger agreement, signed in December 2017, for the sale RComm’s entire fibre and tower network, and most of its mobile spectrum. This includes the sale of 120 MHz of 4G spectrum, over 40,000 towers, nearly 180,000 kilometres of fiber and 248 MCNs. RComm will use the proceeds of the the agreement to reduce its heavy debt burden, which was estimated to total a staggering ₹460 billion last year.

The agreements are a crucial component of RComm’s plan to monetise ₹250 billion worth of assets and the unsustainable portion of its debt obligations. In a cruel twist of fate, RComm is selling its telecom assets to the very company that forced it out of business in the first place after it struggled to find buyers.

A tale of two telecom companies

The deal is symbolic of the converging fortunes of the two brothers. Following its launch in September 2016, Reliance Jio has disrupted the Indian telecom market by reducing rates, onboarding customers in droves and forcing competitors to speed up their innovation. Of course, it helps that the company is funded with the war-chest of Reliance Industries Ltd, a petrochemical conglomerate. At the end of June 2018, Jio overtook Vodafone to become India’s second-largest telecom company by revenue.

Meanwhile, RComm has faced a completely different trajectory. Anil Ambani inherited the company after a 2005 demerger of Reliance Industries. Even though it grew to become India’s second-largest telecom operator, it continually lost market share in the earlier part of the decade and was unable to stay solvent owing to price war initiated by Reliance Jio. Following an intense period of restructuring, Anil Ambani had his sights set on transforming RComm into a B2B company, primarily engaged in the sale of cloud infrastructure and submarine cable systems, but the plan has been put on hold for now.