Business Today

Telecom business 'money guzzler', only few players with deep pockets can enjoy, says Anil Ambani

Anil Ambani said that a company needed enormous amount of money to sustain in the telecom business, calling the telecom sector just a '2-3-4 players' game.

twitter-logo   New Delhi     Last Updated: December 27, 2017  | 15:59 IST
Telecom business 'money guzzler', only few players with deep pockets can enjoy, says Anil Ambani

Apart from announcing a new revival plan to reduce the company's debt problem, Anil Ambani-led Reliance Communications (RCom) on Tuesday said the telecom had become a "money guzzler", a business where only those with "deep pockets" could remain in the game. As per the debt-restructuring plan, the company will raise about Rs 25, 000 crore through the sale of some of its spectrum, tower and fibre network assets. The RCom chairman, however, raised concerns over the regulatory framework and highlighted the "unease of doing business" citing a long time taken to clear RCom's merger with Systema Shyam Telecom.

He also gave an example of loss-making Tata Mobile Service, which was sold to Airtel for free - a deal done on 'debt-free cash free basis'. He expressed that a company needed enormous amount of money to sustain in the telecom business, calling the sector just a '2-3-4 players' game. Anil Ambani-led Reliance Communications suffered heavy losses due to the price war unleashed by elder brother Mukesh Ambani's Reliance Jio, which offers free voice calls and data on dirt-cheap prices.

"This is a crisis of the wireless telecom sector and it has engulfed many, many people and many, many companies. If it is the mighty house of the Tatas who had to gift their business, then very little has to be said about other corporate groups. The writing was on the wall," the embattled RCom chairman said.

Reliance Jio has wrecked the financials of every company and resulted in a massive consolidation in the sector with Vodafone and Idea announcing a merger in March to stay floating. "It's a clear signal that this is something which is not for 10 players to enjoy. This is more for 2-3-4 players to enjoy and those who have either unlimited money or those who have the ability to raise unlimited amount of money," Ambani said, without naming any company.

"You really need a pipeline into the RBI's printing press if you want to be in the wireless business because it is a guzzler of currency, every minute, every hour and every single day," he added. After the failure of its debt-reducing plans like sale of the tower unit and a merger with its immediate rival Aircel, RCom was forced to exit the flagship consumer facing business in this November and also charted a future course which will limit its offerings to the enterprise segment going forward.

Announcing the revival plan, Ambani said China Development Bank, which dragged RCom to the National Company Law Tribunal to recover dues running into $1.8 billion, was also in loop, and that a strategic investor would also be coming on board.

The company is reeling under a debt mountain of over Rs 44,000 crore. Amabni said the plan entails RCom exiting the structural debt restructuring (SDR) framework with no conversion of debt into equity and zero write-off by banks. He expects the deal to be fully closed by March 2018. He said the deal involved an eight-stage asset monetisation process under an oversight committee headed by former RBI deputy governor SS Mundra with members from Trai and the whole process will be completed in 40 days.

The younger sibling of Mukesh Ambani had inherited the telecom business of the Reliance group following the division of the family empire between the two brothers. However, with the non-compete clause in the agreement coming to an end, elder brother Mukesh has made a dramatic entry into the telecom sector and shaken up older players with his disruptive pricing.

With PTI inputs

  • Print

A    A   A