Reliance Communications rumours are continuing to swirl after a weekend of adverts and offers to lure customers away from the troubled telco.
The telco has been in a bit of trouble for a while as debts continued to pile up (supposedly in the region of $6.8 billion), and it would seem the attempted acquisition of Aircel could be the final roll of the Reliance Communications dice. Chairman Anil Ambani had promised cash reserves at Aircel would provide a more stable foundation for Reliance Communications, but both parties seemingly got sick of endless delays, abandoning any deal.
And the smell of blood has made its way to the noses of the cut-throat competitors; apparently the scavengers can’t even wait for the limping giant to die; the steaks are being carved out already. This weekend saw Bharti Airtel launch a number of adverts welcoming any Reliance Communications customers to their ranks, and Vodafone launch a referral scheme, promising a £1.50 kickback to any of its customers who can tempt family and friends into their ranks.
While Airtel and Vodafone are already tucking in, Jio has been relatively quiet. Perhaps this is a bit of family respect, although we understand Anil and Mukesh Ambani aren’t exactly best mates, or maybe it has something to do with a bit of acquisition in the future.
With one brother on the up and the other finding issues in the telco space, some have might believe Reliance Communications is an acquisition target for Jio. This does kind of make sense, as Jio has not exactly created a reputation for being considerate to competitors. It was after all Jio’s aggressive pricing strategy which was the beginning of all the pain in India.
Unfortunately for some, they were not able to live with the pace of change. Telenor withdrawing, Vodafone and Idea merging and Bharti Airtel grabbing Tata Teleservices, demonstrate the consolidation trends. Reliance Communications was supposed to contribute in a more positive manner by buying Aircel, but it could be on the worse end of the deal.
Just to be clear, a Jio acquisition has not been confirmed in any way shape or form, and our sister-site Light Reading reported Reliance Communications would close most of its wireless business over the next month. Apparently, most employees have been told November 30 would be their last day, and the company’s DTH license will expire on November 21. The decision has already been made not to renew this licence.
In days gone, Reliance Communications was known to have a fairly successful 3G-dongle offering, though with the industry moving towards 4G and competitors carving into this niche, the telco has struggled. Reliance Communications has already said 4G is going to be the primary focus as “irrational pricing by all industry participants have destroyed profitability of traditional 2G/3G mobile business”. The team can complain about the underhanded nature of competitor moves if it wants, but situation is actually very simple; the industry changed, Reliance Communications didn’t, and now it is no longer competitive.
The only question which remains is what will happen to the remaining business and its small operations in the 4G space. With Bharti Airtel and Vodafone already picking away at the rotting remains of the Reliance Communications customer base, an acquisition from one of these vultures seems unlikely.
Or maybe the business will find more favour in the 4G world and continue to operate on its own? Reliance Communications has preached about a 4G-focused strategy which would optimize its spectrum portfolio, eliminating the loss-making aspects, but something needs to change. The business is not competing with the new Indian heavyweights, and the pressure of debt looks to be swelling.
Perhaps a family reunion is the most realistic chance Reliance Communications will continue to be, otherwise it will likely be a continued erosion to non-existence.