Mukesh Ambani may reap rewards from younger brother Anil’s telecom woes

Mukesh Ambani may reap rewards from younger brother Anil’s telecom woes
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Mumbai, Mar 20: Asia’s richest man Mukesh Ambani’s decision to end a deal with his brother — even as he bailed him out — may be an astute business move.
While helping keep his sibling out of prison this week, Ambani also ditched an accord to buy the assets of his brother’s beleaguered telecom carrier Reliance Communications Ltd., effectively nudging it toward bankruptcy. With RCom all but sure to head into insolvency proceedings, Ambani may be able to snag those same assets at a discount.
In a last-minute rescue, Mukesh stepped in to help younger brother Anil pay $80 million in dues to a local unit of Ericsson AB and avert a three-month jail sentence. On the same day, his Reliance Jio Infocomm Ltd. and Anil’s RCom terminated a 2017 deal that had helped the latter stave off bankruptcy.
With that deal now off, RCom is likely to go into a court-led process that may provide Mukesh’s Jio another shot at buying up the carrier’s airwaves, towers and fiber. What’s more, he may get them for less than the Rs 173 billion ($2.5 billion) Jio agreed to pay a year ago given the weak financial health of India’s other telecom operators.
Cheaper For Jio
“Jio may have scrapped the asset purchase deal with RCom, but it cannot be ruled out that Jio will try and participate in the purchase,” under the bankruptcy process, said Saurav Kumar, a New Delhi-based partner at IndusLaw, an Indian law firm. That “may eventually be cheaper for Jio.”
A lower price for RCom’s assets would mean deeper haircuts for lenders trying to recover some of the $7 billion in debt the unprofitable operator had as of March 2018.
“India’s bleeding telecom sector will probably keep auction prices low,” allowing Jio to spend less on acquiring RCom’s spectrum, Kunal Agrawal, a Bloomberg Intelligence analyst said in a March 19 note.
Jio’s debut in 2016 with free services slashed tariffs, forcing rivals into a brutal price war, where some merged while others quit or went bankrupt. Vodafone Idea Ltd., India’s no. 1 carrier, continues to report losses while Bharti Airtel Ltd., the second-biggest, has posted profits aided by one-time gains.
Shown Interest
Bharti Airtel’s tower unit Bharti Infratel Ltd. and Canadian private equity fund Brookfield Asset Management have shown interest in RCom’s tower assets, a report said citing sources it didn’t name.