How did Reliance Communications, the king of the telecom sector, get ruined? Who paid off Anil Ambani’s debt?

New Delhi:

Anil Ambani’s company Reliance Communications is once remembered for bringing revolution in the world of telecom, but now it will be remembered only as a defaulter. Dhirubhai Ambani’s Reliance Group was worth 28000 crores. In 2005, when it was divided between the two brothers Mukesh Ambani and Anil Ambani, Anil got the telecom sector. This sector was surrounded with immense possibilities of earning profits. It was decided in the division that Mukesh Ambani would not interfere in the telecom industry for the next 10 years. But Anil Ambani took such decisions in business which proved fatal for his companies. Know how Reliance Communications, the king of the telecom sector, was ruined? Why did Mukesh Ambani have to repay the debt of his younger brother:-

Reliance Infocom was started in 2002. At that time its competitors were Airtel, Hutch (which later became Vodafone). This was the time when 4G was being introduced in India. Therefore both the companies chose GSM technology. On the other hand, Anil Ambani’s Reliance chose CDMA, which at that time supported only 2G-3G networks. Despite heavy investment, Anil kept lagging behind in this.

Anil Ambani then struck a deal with Adlabs in 2005 and Dreamworks in 2008. The deal with Dreamworks was worth $1.2 billion. Meanwhile, he also tried his hand at infrastructure business. However, Anil Ambani did not get much progress in entertainment and infrastructure. By 2014, his power infrastructure companies were drowned in huge debts. Reliance Communication was not given attention. Its bad results started coming out. Then began the phase of taking loans and not repaying them. It even came to the point of selling companies to clear the liabilities. The losses were getting bigger and the size of the business was getting smaller.

Ericsson deal proved to be a loss making deal
RCom had signed an agreement with Ericsson in 2013. According to the agreement, Ericsson had to manage Reliance’s mobile phone towers, fixed telephone lines, broadband, wireless voice and data work. This deal was for 7 years. But it proved to be a very loss-making deal. In 2018, Ericsson approached the National Company Law Appellate Tribunal. Ericsson alleged that RCom got the work done from it and was not paying its Rs 1100 crore.

Anil Ambani’s troubles started increasing from 2014. He could not see any way to recover. Debts were increasing. With this, the 10-year deadline was completed in 2016. This meant that Mukesh Ambani could now enter the telecom sector. Mukesh Ambani had made all the preparations. In 2016, Reliance launched Jio. Not only RCom but all the telecom companies were destroyed in the storm of Jio.

After Jio entered the market, big telecom companies like Airtel and Vodafone suddenly started incurring losses. This was a big shock for Anil Ambani. To recover from this, he had to sell companies like Big Cinema, Reliance Big Broadcasting and Big Magic.

When Mukesh Ambani fulfilled the duty of an elder brother
Even though Mukesh Ambani and Anil Ambani’s paths were different in business, there came a time when Mukesh Ambani, while performing the duty of an elder brother, saved Anil Ambani from debt. In fact, when Ericsson went to court in 2018, RCom also appealed against Ericsson in the National Company Law Appellate Tribunal. RCom opposed the bankruptcy process. It said that it is in talks with Reliance Jio and Brookfield to sell its assets. Once the deal is done, it will pay the money to Ericsson.

RCom promised to pay Rs 550 crore to Ericsson. This amount was to be paid by 30 September 2018. But Anil Ambani could not do so. On this, Ericsson approached the Supreme Court. Then Mukesh Ambani paid off his younger brother’s debt.