Thirteen years ago in April 2003, Mukesh Ambani, chairman of Reliance Industries, in an interview to a television news channel, made a grand pronouncement: “CDMA (based) WLL service has won...CDMA-GSM war is over.” Reliance was then getting ready for the controversial rollout of its mobile phone services. Existing players like Bharti Airtel, the market leader then, were up in arms, with its promoter chairman Sunil Mittal leading the charge against Reliance. The battle was fought in media, in the offices of the telecom regulator, in the corridors of power and went right up to the Prime Minister’s Office. It was an ugly war. The war was over nearly 50 million mobile subscribers and a less than $10-billion market.



Thirteen years down the road, as Ambani prepares to roll out the ambitious 4G network via Reliance Jio, yet another ugly war seems to have erupted in the telecom sector. Back in 2003, existing players like Airtel had accused the regulator and the government of showing undue favour to Reliance and allowing it to make a ‘back door’ entry into the high-growth telecom sector. The same complaints are being heard on a daily basis all over again (see related story). This time, the war is over more than a billion subscribers and a $100-billion market, as well as control over the market for data and data related services. This time again, the main fight is between Airtel’s Mittal and Ambani.



Incidentally, Nripendra Mishra, the current principal secretary to the prime minister and recipient of the Cellular Operators Association of India (COAI) appeal to interfere in this full blown corporate war, was secretary in the department of telecom during UPA-1 when Dayanidhi Maran was the telecom minister (from 2004 to 2007. Mishra was also the chairman of the Telecom Regulatory Authority of India (Trai) between 2006 and 2009 when A. Raja was the minister. That era is now notorious for the 2G scam that allegedly caused a notional loss of Rs 1.76 lakh crore to the Indian exchequer. Mishra has deposed as a witness in some of the 2G cases. Incidentally, former telecom minister A. Raja, who spent many weeks in Tihar Jail, is about to publish his autobiography that promises to make more explosive revelations about shenanigans in the Indian telecom sector.



What is it about the telecom sector that makes it a hotbed of intrigue, controversies, subterranean corporate warfare and persistent allegations of favouritism and cronyism? Almost every business family with an eye on the future, and many entrepreneurs with self-belief have tried to grab a share of the telecom pie. The Aditya Birla group, the Tata group, the Modis, the Ruias of Essar and the Dhoots of Videocon have all tried their hand, with varying degrees of success. Major multinationals too have tried, with Vodafone as arguably the only global telecom player that has survived the brutal telecom market in India. The sector has seen many reputations get sullied. DMK leader A. Raja and Kanimozhi, daughter of DMK supremo M. Karunanidhi, top bureaucrats like former telecom secretary Siddharth Behuria as well as corporate figures like Shahid Balwa and Sanjay Chandra of Unitech have had to serve time in jail in the 2G scam. The infamous Radia tapes not just revealed how top corporate houses in the country used trick to get some telecom related decisions in their favour, but also ruined the reputation of many senior media professionals. What gives?



Two things are key. First, the stakes in the sector are very high because of the sheer size and promise of the market. And second, despite all efforts at transparency, the inability of the government to affect long-term corporate outcomes. One just needs to look at the promise of the telecom sector. In 1995, hardly anybody had heard of Sunil Mittal when his fledgling company won a few licences to launch mobile phone services. Not many, not even prescient analysts had an inkling of the massive telecom revolution that was to sweep across India. According to various estimates, the telecom sector in India will be worth more than $100 billion by 2020. It is already the second largest market in terms of numbers with close to 1.05 billion subscribers. Of this, less than 20 per cent use smartphones and access the Internet using 3G and 4G technology. It is estimated that two out of every three handsets sold in India will be a smartphone by 2020. By the end of 2017, India is poised to become the second largest market for smartphones, relegating the United States to number three.



But nothing really encapsulates the promise and magic of the telecom sector in India than the story of Mittal. Twenty-one years after Mittal launched Airtel in Delhi, he is ranked as one of the richest Indians and also enjoys the status of a global billionaire with a personal net worth of close to $7 billion. His company Bharti reported revenues of $14.75 billion in financial year 2016 and its market capitalisation hovers around the $22-billion mark. According to a July 2016 report by COAI, Airtel is the undisputed market leader in India with a subscriber base of 255 million. Smart entrepreneurship, brand building, the willingness and ability to fight bitter corporate wars and the telecom revolution have enabled Mittal to achieve all this in just about 20 years. Bharti Airtel is now a global player with a significant presence in some African countries and is determined to retain its numero uno status in the Indian telecom market.



And that’s exactly what Ambani covets. The Ambanis have always dreamt of dominating the telecom sector. Back in the year 1995, when mobile phone licenses were auctioned for the first time, family patriarch and visionary Dhirubhai Ambani had realised that his group needed to look beyond oil, petroleum and petrochemicals for growth in the 21st century. But Reliance fared poorly during the auctions and won a few nondescript markets such as Odisha and eastern Uttar Pradesh. By the late 1990s, the Ambanis felt that they were missing the telecom bus and that is when they went for an ambitious and audacious strategy of using CDMA technology to gate crash the party. Existing players like Airtel and Essar used the better known GSM technology. The Ambanis gambled on the new CDMA platform with a little bit of help from the government. So much has been written about that war and controversy that it doesn’t merit repetition here. Suffice to say that telecom lobbying was the hottest item of gossip during Atal Bihari Vajpayee-led NDA-1 government in which the late Pramod Mahajan was one of the most

powerful ministers.



Mukesh Ambani might well have had the better of Mittal in the first decade of this century but for the demise of Dhirubhai in 2002. His two sons Mukesh and Anil found it difficult to work together after his death. By early 2005 it became clear that the two brothers were heading for a bitter and potentially damaging split. Family friends like K.V. Kamath, then chairman of ICICI Bank, stepped in to mediate and fashioned a somewhat orderly and civilised parting of ways. Mukesh had to choose between relinquishing control over the cash and “power” generating oil and petroleum business and letting go of his telecom dreams. Mukesh took the only practical decision he could and retained the old Ambani empire. Younger brother Anil got the telecom business. The split between the two brothers had a non-compete clause which prevented them from encroaching on each other’s territories for five years.



The brothers had split in June 2005. In June 2010, Reliance delivered a masterstroke that would give birth to Reliance Jio Infocom (RJio). On 12 June 2010, it announced that it had purchased a 95 per cent stake in Infotel Broadband Services, an unlisted company, for about Rs 4,800 crore. What was so special about this unknown company? Earlier that day, Infotel was the only firm to win broadband spectrum in all 22 zones in India in an auction. Infotel had committed to pay $2.7 billion for the nationwide broadband licence. That is when RJio was born and Ambani got ready to make another attempt to dominate the telecom market.



Ambani’s public pronouncement soon after the takeover made his intentions clear: “We see this as the next wave of value-creation opportunity in the wireless broadband space. We believe this will pole-vault India’s economy into the digital world at an accelerated pace while creating next generation tools that will enhance productivity and create world-class consumer experiences.” Since then, Ambani has been painstakingly plotting a triumphant comeback. Reliance has since then invested close to Rs 1.35 lakh crore in Jio. That Ambani means business is clear from the fact that he has invested Rs 45,000 crore by way of equity. This has enabled the company to lay 2,70,000 km of fiber optic cables and erect about 92,000 towers. Mittal sure has a rough and tough battle to confront.



For those not following this sector and this war, here are a few nuggets. Infotel, which Reliance took over in June 2010, was promoted by HFCL and controlled by Mahendra Nahata. Back in 1995, when the first auction for mobile phones were organised, Nahata and HFCL had emerged from the obscurity of Himachal Pradesh by making astronomically high bids that were simply not realistic. Many analysts still insist that Nahata and HFCL had simply ruined that auction. A powerful politician from Himachal Pradesh, Sukh Ram was the telecom minister during this auction drama. Soon after this happened, Sukh Ram was allegedly caught by the CBI with currency notes worth crores of rupees in his home during a raid.



That’s history, of course. And so is the 2003 telecom war when a then newly minted tycoon, Mittal, took on the mighty Ambanis. Back then, the fight was to acquire more and more subscribers. It is a bit like the war between e-commerce biggies Flipkart and Amazon and cab aggregator biggies Ola and Uber to grab as many new customers as possible. This time too, it is about customers and market share.



But the world has changed. In 2003, telecom companies were overwhelmingly dependent on charges for phone calls and text messages for their revenues. Today, and more so in the future, it is data and apps that are seen driving revenues, market share and profits for telecom companies. Twenty-first century startups like Skype have already demolished the monopoly that telecom companies had over phone calls. New apps like WhatsApp have completely destroyed the ability of telecom companies to depend on voice calls and messages to generate revenue.



Now, it’s all about data and content. The arrival of smartphones has ensured that consumers use the hand held device for virtually everything that the Internet has to offer. The magic button is now truly with the smartphone. Telecom companies in India made a faltering start with 3G data packs that locked in revenue. With the arrival of 4G technology that promises very fast Internet speed and seamless content download, the rules of the game in the telecom sector have changed. Multi-media content streamed over smartphones is the future. And the telecom company that delivers the most engaging content at the fastest possible speed will be the winner (see related story).



This is where Ambani hopes to be second-time lucky. RJio has no match when it comes to controlling a nationwide optical fiber network that will deliver Internet speeds that Indian consumers can only dream of. By the end of 2017, Ambani will have access to 300,000 km of fiber optics network and about 100,000 mobile towers. Most of the Rs 1.25 lakh crore invested so far has gone into developing this backbone. RJio has already executed a ‘test’ launch with about 1.5 million connections offering pure play 4G services to group employees and a select cohort of potential customers. According to company insiders, it plans to build a ‘test’ customer base of more than 20 million and then go for a massive nationwide launch after taking care of teething problems.



Backend infrastructure is not the only thing that Ambani is gambling on. He has made huge investments in content too. In 2014, Reliance announced the formal strategic takeover of Network 18, a media company promoted by Raghav Behl with key properties such as CNBC-TV18, CNBC Awaaz, CNN-IBN, Online portal Firstpost, entertainment channel Colors, the ETV portfolio and much more. The company has invested more than Rs 2,300 crore for this takeover. It hopes to leverage the huge content generated by these media properties to lure more and more consumers to embrace RJio. Ambani can also rely on the clutch of media-related properties promoted by younger brother Anil to source content.



At the moment, leading the pack are Airtel with 255 million subscribers, Vodafone with a shade above 200 million and Aditya Birla group-promoted Idea with close to 190 million subscribers. Will all this fulfil Ambani’s dream of becoming India’s telecom emperor?



Not if Mittal has any say. Since 2015, Airtel has been investing in and promoting its 4G network in the most aggressive manner possible. In fact, its ad campaign around the Airtel girl accessing 4G connections across remote corners of India has become a legend by itself. According to telecom industry specialists, Airtel has managed to successfully capture the 4G ‘mindspace’ with its aggressive campaign. But it now faces a price war as RJio will use the cash muscle of the parent entity to lure subscribers at throwaway prices. For example, Jio has already launched a Lyf brand of 4G handsets at less than Rs 4,000 a pop. Thanks to its massive broadband network, it is uniquely positioned to offer high speed data services at low rates. This will be a fascinating battle to watch as RJio, Airtel, Idea, Vodafone and others go flat out to lure the next generation of ‘smart’ telecom consumers.



Since so much is at stake, it is but inevitable that lobbying with the government would be an integral part of the corporate strategy. The Narendra Modi government came in with a promise of stopping crony capitalism at the highest levels and ensuring transparency in the allocation of natural “resources” like telecom spectrum and coal mines. To its credit, there has been no major scam witnessed during UPA-II. And yet, thanks to the fine print embedded in many regulatory norms, the government and regulators like Trai continue to hold considerable powers of patronage. The telecom industry is all agog with speculations over what will happen when telecom spectrum is auctioned again as scheduled in the month of October. Will the old ghosts of lobbying and patronage come back? Or will there be a genuine level field?



Either way, this round of the telecom war promises to be even more bruising and brutal than the previous ones.