The bonhomie between Mukesh and Anil Ambani has not always been this strong. (File)

Asia's richest man Mukesh Ambani's decision to end a deal with his brother -- even as he bailed him out -- may be an astute business move.

While helping keep his sibling out of prison this week, Ambani also ditched an accord to buy the assets of his brother's beleaguered telecom carrier Reliance Communications Ltd., effectively nudging it toward bankruptcy. With RCom all but sure to head into insolvency proceedings, Ambani may be able to snag those same assets at a discount.

In a last-minute rescue Monday, Mukesh stepped in to help younger brother Anil pay $80 million in dues to a local unit of Ericsson AB and avert a three-month jail sentence. On the same day, his Reliance Jio Infocomm Ltd. and Anil's RCom terminated a 2017 deal that had helped the latter stave off bankruptcy.

With that deal now off, RCom is likely to go into a court-led process that may provide Mukesh's Jio another shot at buying up the carrier's airwaves, towers and fiber. What's more, he may get them for less than the 173 billion rupees ($2.5 billion) Jio agreed to pay a year ago given the weak financial health of India's other telecom operators.

Cheaper For Jio

"Jio may have scrapped the asset purchase deal with RCom, but it cannot be ruled out that Jio will try and participate in the purchase," under the bankruptcy process, said Saurav Kumar, a New Delhi-based partner at IndusLaw, an Indian law firm. That "may eventually be cheaper for Jio."

Mukesh Ambani stormed India's telecom market in 2016 with Jio, offering free services and later discounted tariffs, which forced rivals into a brutal price war, where some merged while others quit or went bankrupt. Jio's entry deepened RCom's woes as the younger brother's business struggled with debt and a cash-squeeze.

Vodafone Idea Ltd., India's no. 1 carrier, continues to report losses while Bharti Airtel Ltd., the second-biggest, has posted profits aided by one-time gains. Jio's strength is buttressed by cash flows from parent Reliance Industries Ltd.'s petrochemicals and refining businesses.

"India's bleeding telecom sector will probably keep auction prices low," allowing Jio to spend less on acquiring RCom's spectrum, Kunal Agrawal, a Bloomberg Intelligence analyst said in a March 19 note.

Emails seeking comment from spokespersons at Reliance Industries and RCom went unanswered.

Diverging Fortunes

A lower price for RCom's assets would mean deeper haircuts for lenders trying to recover some of the $7 billion in debt the unprofitable operator had as of March 2018.

As Anil's fortunes have nose-dived, Mukesh's have soared -- partly due to enthusiasm about the expansive vision he's laid out for his consumer businesses, which aim to take on the likes of Amazon.com Inc. and Walmart Inc. in India's retail industry.

Anil's net worth has shrunk to about $300 million from at least $31 billion in 2008, based on the current foreign-exchange rate, according to data compiled by Bloomberg. Mukesh's fortune is pegged at $55 billion, according to the Bloomberg Billionaires Index.

The two brothers' paths began to diverge more than 16 years ago, when their father Dhirubhai Ambani died of a stroke without leaving a will. The industrialist, who started out as a gas-station attendant in Yemen, had built a vast business empire, which the rival siblings divided in 2005 in a peace pact brokered by their mother.

Anil this week thanked his brother and sister-in-law for their support.

"My sincere and heartfelt thanks to my respected elder brother, Mukesh, and Nita, for standing by me during these trying times, and demonstrating the importance of staying true to our strong family values," Anil said in a statement issued by Reliance Communications.

Soon after reports of the bailout, the hashtag #MukeshNitaSaveAnil started trending on Twitter, according to a report on Scroll.in, an online news site. Hundreds of identical tweets praising Mukesh and his wife began to appear on Twitter, according to the report, which noted that it wasn't unusual for public relations agencies to use influencers on the social media platform.

Comprehensive Resolution

RCom on Monday reiterated that it was "committed to a comprehensive resolution" of its overall debt through India's bankruptcy process. The carrier's shares jumped by the daily limit of 10 percent for a second day on Wednesday following the payment of Ericsson's dues.

A lack of approvals from over 40 Indian and foreign lenders over 15 months was cited as one of the reasons for killing the Jio deal, according to a RCom statement, besides other regulatory delays.

Under bankruptcy proceedings, a court-appointed insolvency professional and panel of secured creditors will invite bids for RCom's assets and oversee the sale process. About two-third of the creditors will need to agree to any resolution plan.

Significant Haircuts

"It's likely that bankers may approve a deal with some significant haircuts," given the insolvency law doesn't require consensus, IndusLaw's Kumar said.

A year ago lenders had hoped for a very different outcome when Anil Ambani promised there would be no write-offs or equity conversions as his company neared asset sales. Earlier in 2017, he had promised RCom's debt-reduction plan would be the largest in India's history.

None of that went as planned. Banks were this month reprimanded by a judge for failing to crack down on RCom and better scrutinize the ambitious recovery picture it had painted.

"It takes two hands to clap," said Justice S.J. Mukhopadhaya of the National Company Law Appellate Tribunal. "You have also failed. You can't just say they (RCom) failed."