With the entry of Reliance Jio, headed by brother Mukesh Ambani, leading to spiraling losses for Reliance Communications, Anil Ambani has warned that the wave of consolidation in the telecom sector was going to lead to fewer options for consumers. Anil Ambani-controlled RCom has been struggling to reduce its debt and stay solvent.
Addressing shareholders at RCom’s annual general meeting on Tuesday, Ambani said that the various mergers in the works may put mobile phone consumers at a disadvantage.
"So, wireless sector from a hugely customer-friendly, choice-driven, 10-player market is slowly moving towards what is referred to in economic terms as either oligopoly, duopoly or potentially a monopoly. Is that something 1.2 billion people in India deserve?" he said. "Is that what customers really want?"
While he did not name Jio directly, his obvious reference was to the new entrant controlled by his elder brother Mukesh Ambani which had disrupted the market with free voice calls and low-cost data tariffs.
The current shakeup in the industry could see only Bharti Airtel, the proposed Idea-Vodafone merger and Reliance Jio remain as the primary players. RCom itself is pursuing a threeway merger involving Sistema Shyam Teleservices and Aircel.
At the AGM, Anil also cited legal challenges and corporate rivalry as struggles for the company. His apparent reference was to the delayed merger of RCom with Sistema Shyam Teleservices by one shareholder.
"We have a transformative, debt-reduction programme and we are working through that. At every stage, there are legal challenges - motivated regulatory challenges that are creations of public interest litigations. There is intensive corporate rivalry," Ambani said.
"We are not here in any situation to be tortured, tormented or blackmailed by anybody. We will do our best, we have various options. One of the things I learnt from father was never have one plan, always have five plans, we will never know which plan works," he added, without giving details.
Ambani further said that several operators had seen "value erosion and large losses" over the past year, causing the "creative destruction" of a once-vibrant sector. Ambani warned that the sector is literally "in the ICCU now and a mere paracetamol or aspirin won't help."
The need of the hour, he said, is "a constructive solution with all players" at the earliest, "with maximum pain to be borne by the promoters and minimum pain by the lenders."
RCom posted a consolidated net loss of Rs 1,221 crore in the fiscal first quarter to June compared with a year-earlier net profit of Rs 54 crore. June quarter revenue shrunk 33 per cent to Rs 3,591 crore from Rs 5,361 crore in the year earlier.
RCom has been looking to sell its stake in tower unit Reliance Infratel to Canada's Brookfield. This, along with the pending Aircel merger, will help the telco repay nearly 60 per cent of its over Rs 45,000 crore debt.
However, the the company, in the midst of strategic debt restructuring after defaulting on some of its loan repayment obligations, needs to complete the transactions by December, failing which it can be declared a non-performing asset and see the deals collapse.
The telco has already failed to meet its initial deadline of completing the deals by September after intense opposition from lenders, vendors and even the telecom department at the National Company Law Tribunal (NCLT).