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New twist in telecom war as Anil Ambani enters fray

Speculation is rife that Anil Ambani may be looking to join the incumbent telecom giants' camp, led by Sunil Mittal and Kumar Mangalam Birla, in their battle against RJio

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Anil Ambani and Mukesh Ambani
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For Anil Ambani, who inherited the telecom business of the Reliance group in India's biggest corporate family feud, in 2005, history is playing out a nasty rerun.

Over a decade after the acrimonious family dispute ended and a few months after he announced a "virtual merger" of his company, Reliance Communications, with Mukesh Ambani-run Reliance Jio, Anil Ambani seems to be now drifting away, to salvage his debt-ridden telecom company.

Speculation is rife that Anil Ambani may be looking to join the incumbent telecom giants' camp, led by Sunil Mittal and Kumar Mangalam Birla, in their battle against RJio.

Sources tell DNA Money that Anil Ambani would be part of the delegation consisting of Sunil Mittal, Kumar Mangalam Birla and others, meeting the telecom minister Manoj Sinha on June 22 to plead their case against RJio. In fact, rivals have played a masterstroke by directly or indirectly roping Anil Ambani in this entire game.

Anil Ambani's camp is quick to deny such a move. A company official, however, requesting anonymity, said, "Everyone runs his own business, and is driven by market compulsions. Anil will be joining rival telcos' delegation to meet Sinha on June 22."

In his capacity as RJio owner, Mukesh Ambani has also been invited to attend the meeting. Sources say that he has been very choosy in attending the government meetings. Normally, all such telecom meetings are being attended by his close associate Mahendra Nahata, under a close supervision of Manoj Modi, who happened to be "Mukesh bhai's one-man army" in his telecom war. Surprisingly an engineer by profession, Modi has masterminded the art of fighting and finishing the rivals. At the political level, all important communications between RJio and the central government were being exchanged by a trusted Ambani hand Parimal Nathwani, who is also a member of Parliament, currently undergoing some medical treatment. So, everyone in the industry is keenly watching if Mukesh Ambani would attend the meeting next week.

The two Ambani brothers, who fought a long, bitter family feud, had almost sorted out all issues and even extended ownership of certain infrastructure properties recently. But now, the new development may raise some serious question on their alliance. But insiders feel that a seasoned and cool minded Mukesh will not allow the situation to escalate into a fresh business battle against his own brother.

A senior industry official said Anil Ambani's commentary on the state of the industry and his telecom firm and resolution to the current financial woes was more "aligned" to what incumbent players like Bharti Airtel and Idea Cellular have been voicing."When you look at the things he asked for from the government in order to address the financial condition of RCom, they are certainly more aligned with the incumbent operators," he said.

Another senior telecom dignitary said what the elder brother is doing in the market has also sent his sibling's telecom business into a tizzy and pushed it to the brink of default sooner than it would have otherwise been. "Obviously, it (Mukesh's launch of 4G services) doesn't suit him (Anil). He was also not ready for 4G. It's the same thing that applies to others," he said.

He, however, said the pact between the siblings was beneficial for Anil as without a merger his company was getting the benefit of RJio's optic fibre network and spectrum. He went as far as speculating a merger between the brothers in future.

Another senior executive of a leading telecom company, who did not want to be named, said; "You must understand the fact the actions of RJio since September 5 (when it launched its free voice and data services for six months) have severely impacted not just all the existing operators but his own brother as well".

"Anil's operations were in deep trouble, which is why he had sought the merger with other operators (Aircel and MTS) to try and simplify his operations and achieve some kind of scale, but in spite of that, the actions of RJio have impacted his business very severely. So, it's not a question of whether he (Anil) is against his brother or for the incumbents. The issue is, to put it in the right perspective, RJio's actions have impacted the entire industry," he said. According to him, Anil has been compelled to move over to incumbent players' camp to fight for survival.

Mukesh Ambani's RJio is a member of lobby body for GSM operators Cellular Operators Association of India (COAI) while Anil's RCom is part of Association of Unified Telecom Service Providers of India (Auspi), set up by CDMA players.

A serious aspect of this entire issue is that the telecom companies are reeling under a massive Rs 4 lakh crore debt and staring at falling revenues and profitability in face of tough competition by the entry of RJio and its free offers. Prior to Sinha's meeting, the Inter-ministerial Group (IMG) has begun meeting all companies for a separate discussion.

RJio, which met the IMG on Monday, suggested that the companies needed to raise funds by selling stake or invest in new technology through internal accruals. Over the next few days, the IMG will also meet other operators including Bharti Airtel, Vodafone and Idea Cellular, as well as top officials of telecom PSUs – Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd.

During the last few months since its much-discussed launch, RJio has been a clear winner in the telecom battle, where the telecom ministry and the telecom regulator's (Trai) view has been very clear that consumer is the king and they have the right to avail the most efficient service at the most competent price. By taking this open stand, the Narendra Modi government has given a clear message to the telecom operators that it is not averse to RJio's free offers, which were seriously objected by the rivals.

But an another important aspect of the entire controversy is that after having an almost "indifferent" attitude, now the telecom ministry has finally made up its mind to carefully listen to the arguments of rival operators against RJio.

A high-level committee was constituted under the chairmanship of Cabinet secretary to examine the case on merit. However, keeping in mind the fact that former coal secretary was sent to jail, a fearful P K Sinha further delegated this inquiry to a sub-committee, which has been asked to furnish its report by June 17. Meanwhile, the rival operators have virtually threatened the government by raising a red-flag saying that RJio free services would ultimately hit the government revenue and also create a situation in which almost all telcos may fall sick and repayment of bank loans turn toxic. It will open a new "Pandora Box" between the struggling telcos and the banks.

So, the next few weeks will be crucial for the industry.

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