The once-warring Ambani brothers, Mukesh and Anil, have decided to come together to launch fourth-generation (... Read More

MUMBAI: The once-warring Ambani brothers, Mukesh and Anil, have decided to come together to launch fourth-generation (4G) mobile phone services by the year-end, signalling a consolidation in the fragmented Indian telecom market.

Terming it as a “virtual consolidation”, Reliance Group chairman Anil Ambani said at the Reliance Communications (RCom) annual general meeting here on Wednesday that he was tying up “trading and sharing” of spectrum with Mukesh Ambani-led Reliance Jio (RJIO) for offering 4G services. RCom is India's fourth-biggest mobile phone carrier by subscribers. Ambani, however, did not disclose any equity transaction at this juncture.

READ ALSO: Reliance Communications to partner Reliance Jio for 4G services

“I’m grateful to my elder brother Mukesh bhai for his unstinted support and guidance,” he said. Invoking his father, Ambani said; “With this partnership my father will be a very happy man in heaven as is my mother here”. Both his mother Kokilaben and his wife Tina Ambani were present during the AGM.

The Ambani brothers started collaborating in 2013 after a long period of bitterness that followed the much-publicised split of 2005 in the erstwhile Reliance empire founded by their late father Dhirubhai Ambani. One of the more significant deals they struck was when RJIO decided to share RCom’s extensive inter-city and intra-city infrastructure of nearly 520,000 km of optic fibre pairs and 45,000 towers. The aggregate value of the deal was pegged at Rs 12,000 crore.

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Not only does the latest development symbolize a formal joining of hands between the two companies but it also has wider ramifications for the fiercely competitive Indian telecom industry where Sunil Mittal-led Airtel, Kumar Mangalam Birla-helmed Idea and multinational giant Vodafone are set to slug it out, that too at a time when margins are getting squeezed.

What could give a booster shot to the combined might of the Ambani telecom arms is the ongoing talks between Anil Ambani and Russian billionaire Vladimir Yevtushenkov's Sistema, to merge its Indian operations with Reliance Communications through a stock swap deal, thus creating a new telecom power house. The proposed deal with Sistema will extend the validity of spectrum in the 850 MHz band in eight key circles by 12 years — all the way up to 2033.

“RCom’s discussions to merge SSTL/MTS India (Sistema) operations through a stock swap are at an advanced stage and we are expecting to finalise and announce this in the course of the next few weeks,” said Ambani adding that the merger would help it in eight circles and add to the spectrum it already holds. Fierce competition among 12 carriers have pushed tariffs to among the lowest globally even as they have spent billions of dollars to buy telecom airwaves to meet surging demand for voice and data services.

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RIL shares gained 2.5% to close at Rs 860 while RCom shares gained 6% to close at Rs 68, valuing the company at Rs 16,900 crore in a firm Mumbai market on Wednesday.

RCom was launched in 2002 as Reliance Infocomm under the unified Reliance empire with its ‘501 Monsoon Hungama’ scheme; within a few years, it became India’s second largest operator. RCom went to Anil after the split. The start of Jio’s services, toward the end of the year, will mark the return of Mukesh – the driving force behind Reliance Infocomm – in telecom after a decade. Jio has spent over Rs one lakh crore ($16 billion) to launch 4G bundled voice and data services in the world's second-biggest market by number of customers.

