Reliance Comms board finally falls on its sword

Anil Ambani and four other board members have resigned, ten months after Reliance Communications filed for bankruptcy.

Chairman Anil Ambani, whose brother Mukesh is the person most responsible for the demise of RCom thanks to the creation of Reliance Jio, has finally decided to end his association with the decaying corpse of his company. Joining him in calling it a day are fellow board members Chhaya Virani, Ryna Karani, Manjari Kacker, Suresh Rangachar and CFO Manikantan V.

The news came in a filing with the Indian National Stock Exchange. Why the above board members hung around as long as they did is a mystery, but the ongoing carnage in the Indian telecoms sector, which has been exacerbated by the government’s remand that the legacy operators hand over billions of rupees in historical license fees.

Assuming that timing is more than a coincidence, it will be interesting to see what RCom’s creditors have to say about the move. According to the filing it’s in the power of a committee of creditors to accept or reject the resignations. If the directors are in any way personally liable for any of RCom’s debts then you would expect its creditors to be keeping a close eye on them.

RCom boss opts to pay Ericsson bill rather than go to prison

Indian telco Reliance Communications owed kit vendor Ericsson millions of dollars but didn’t feel like paying up. The threat of jail time seems to have changed its mind.

At the start of the year Ericsson requested RCom Chairman Anil Ambani be locked up unless his company settles its debts but a couple of months later it still hadn’t coughed up. The Indian court gave him until 19 March to find the cash and now, with one day to spare, it’s being widely reported that Ambani managed to scrape together enough shrapnel to remain a free man.

The precise amount handed over was 462 crore rupees, which we’re going to take Reuters’ word for that being equivalent to around $67 million because we can’t get our head around India’s number system. That still seems to leave $10 million or so outstanding, but is presumably enough to placate the Indian courts for now.

Had he not paid Ericsson Ambani would have been held in contempt of court because it had been judged that he had the cash handy, but just felt like holding onto it. We’ve all felt that from time to time and, if we’re honest, sometimes it’s only the law that keeps us honest. RCom’s shares were down 9% at time of writing and are trading at around the quarter of their price a year ago.

Jio claims another scalp as RCom is down and out

Reliance Communications has arguably gotten the sharpest end of the Jio stick over the last couple of years, but it seems the misery is finally over as the firm files for bankruptcy.

According to The Times of India, Chairman Anil Ambani has approached the National Company Law Tribunal to file for bankruptcy after a torrid couple of months which capped off a horrendous a couple of years. Although the team thought there might be some salvageable assets in a deal with Reliance Jio, this might prove to be the final chapter of the telco story for Anil.

Over the last couple of months, RCom has been attempting to navigate the red-tape maze to sell spectrum assets to Reliance Jio, though this transaction has been blocked due to no-one tackling responsibilities for debts owed to the Department of Telecommunications. The DoT was not willing to greenlight the deal until it had reassurances, though with RCom not able to pay and Jio not willing to, the deal entered a stalemate.

Of course, the plot thickens when you consider this cash was supposed to help RCom pay off various other debts, including one to Ericsson, which had been attempting to get Ambani arrested and imprisoned over the monies owed. It has all seemingly fizzled out into somewhat of a depressing end for RCom.

15 years ago, however, this would have been far from imaginable. The firm used to be one of the more promising telcos in a relatively lifeless market. India has long been one of the ‘BRIC’ nations, with potential fortunes enough to convince many to make a bet on the market. However, incumbent players were happy with the status quo and India fell behind the rest of the world in the digital rankings. That was until Anil’s brother Mukesh turned up with his new business Reliance Jio.

Reliance Jio changed the rules of the game and offered a disruptive data-driven service which appealed to the Indian consumer. Soon enough millions of Indians were ditching traditional telcos in pursuit of the glories hidden in digital society. RCom did not adapt and is now suffering the consequences of standing still for a decade.

RCom now joins a growing list of casualties in India. With the Vodafone/Idea merged business planning its assault, you have to hope this ‘new’ player will be able to offer some resistance to the Reliance Jio momentum. Although this is an admirable success story, there are a worryingly small number of telcos for such a vast market.

Ericsson seek Ambani arrest over unpaid RCom bill

Ericsson has filed its second contempt petition against Reliance Communications in the Indian Supreme Court asking for Chairman Anil Ambani to be arrested.

The dispute between Ericsson and Reliance Communications is not a new one, though this certainly steps the conflict up a level. With previous lawsuits focusing on unpaid bills, Ericsson has requested be detained in civil prison and be barred from travel overseas unless he can guarantee the payment of 550 crore rupees (roughly $79 million) owed for various products and services.

According to The Economic Times, Ambani has previously given guarantees in court that the debt would be repaid to the Swedish vendor, though since the December 15 deadline is firmly in the past Ericsson executives have gotten twitchy. The last filing asks Ambani be detained until there are concrete guarantees the bill will be paid.

Having missed the original payment in September, Ambani and Reliance Communications were given until December 15 to find the cash, though this has proved more difficult than expected. Ambani is in a bit of a stalemate at the moment, as while he will not want to be arrested, payment somewhat relies on the sale of licenced spectrum assets to Reliance Jio, a transaction which is being held up by the Department of Telecommunications.

This deal is currently in limbo, as while the National Company Appellate Law Tribunal has given the green light for the sale (and told the Department of Telecommunications to clear it), the hold-up is concerning cash. The Department is standing its ground, stating it is not possible to clear the deal unless there was clarity on payment of dues and associated charges. Reliance Jio CEO Mukesh Ambani has stated the company would not be prepared to take any liable for dues owed by Reliance Communications.

With all parties refusing to give in the road ahead does not look like a pleasant one. Not only has his telco business suffered due to the success of his brother’s disruptive influence on the market, but in refusing to accept liability Mukesh is pushing further misery, and a potential jail sentence, onto Anil.

On the other side of the coin, Mukesh’s Reliance Jio is having a much happier time. The latest figures from TRAI suggest the telco grew its subscriber base by more than 10 million, taking total market share up to 22.46%.

That said, family disputes mean nothing to the Swedes. Ericsson will seemingly push ahead to recover the debt, whatever the cost.

RCom gives green light to offload wireless unit

Reliance Communications has been given the go-ahead to sell off its wireless business unit after National Company Appellate Law Tribunal removed an order blocking the sale.

The NCLAT had blocked the sale of the wireless assets due to various legal challenges, including one from Ericsson. The Swedes claimed RCom had not paid it for equipment and services for two years, and instead tried to pull a fast one by issuing a few post-dated cheques. After this obstruction has been lifted, RCom is now free to offload the unit to Reliance Jio.

“As directed by the Hon’ble Supreme Court, RCom moved the Hon’ble NCLAT today for vacation of the stay in relation to sale of its tower and fiber assets” a RCom statement reads. “The Hon’ble SC had itself vacated the stay in relation to spectrum, MCNs and real estate yesterday.

“By an interim order passed today, the NCLAT has vacated the remaining stay, and allowed execution of sale deeds and deposit of the proceeds with SBI in an escrow account. Based on these orders, RCom can now proceed with completion of its entire asset monetisation plan, covering spectrum, towers, fiber, MCNs and real estate.”

The delay in the sale would not have been welcomed by Anil and Mukesh Ambani, two brothers who respectively own Reliance Communications and Reliance Jio, and who reportedly not get along. Offloading the wireless business unit is one step in Anil exiting the disruptive and chaotic telco space.

The circling sharks are starting to nibble at Reliance Communications

The problems at Reliance Communications are starting to become very well known, and it would appear one of its creditors has finally lost faith in the struggling telco.

According to the Financial Times, the Indian telco has been hit with an insolvency petition from its largest creditor China Development Bank. It is another heavy blow after a couple of months which has seen it lose market share, revenues plummeting under intense pricing pressure and share price dropping drastically. CEO Anil Ambani is certainly the brother feeling the sharp end of the stick.

For those who are not knee-deep in financial terms, an insolvency petition is essentially a creditor asking a court for a winding-up order. Should the petition be successful, the court will place the company into what is called compulsory liquidation. The liquidator realises the assets of the company, and distributes them between creditors according to their priorities, after the deduction of costs.

In short, the China Development Bank has lost any confidence it had in Reliance Communications to compete in the market, and is therefore attempting to force the telco to pack up and pay its debts. China Development Bank wants to recover as much of its investment as possible before the spreadsheets become too much of a disaster zone.

Reliance Communications has stated it has not received notification of the petition, but has said it is actively talking with creditors, including China Development Bank, to plot a path back to the right side of wrong. The company currently owes around $7 billion to creditors, and considering the direction the telco is currently heading, you can see why China Development Bank is getting a bit nervous.

According to Ovum’s WCIS, Reliance Communications is one of the only major players who is not growing its mobile subscriber base, market share has declined from 10% to 6.4% and the proportion of postpaid customers has declined to 3.95% from 6.63% (the vast majority are heading the opposite direction). Revenues also declined to $407 million in the latest quarter, down from $768 million in the same period for 2016, while expenses were $839 million.

Reliance Communications is rumoured to be in discussions to offloading some of its assets to Bharti Airtel, but apparently that isn’t enough for China Development Bank. The sharks have got the smell of blood and are going to bite off as much as possible before there is nothing left; China Development Bank just wants to make sure there is enough left when it arrives to the feast.

Bharti said to be sniffing around RCom

Bharti Airtel is reportedly eyeing up Reliance Communications spectrum assets, which are currently being sold by lenders who are trying to recover Rs45,000cr in debt.

According to India Infoline, Bharti is making moves towards the assets, though Reliance Jio are also interested in the assets. RCom has been struggling for some time now, and is rumoured to be shutting down its voice services from next month. Perhaps we are about to see the beginning of a bidding war.

It certainly wouldn’t be the first time Jio has turned up and spoilt a Bharti Airtel party. Perhaps we should not be surprised by Bharti Airtel cracking open its wallet and trying to buy its way out of a difficult situation.

To counter the Jio challenge, we have seen a few different tactics. Vodafone and Idea for instance, decided there was logic in making friends. Combine two of the largest players and create a new market share leader. Seems like a good idea. Others, such as Telenor, decided they didn’t want anything to do with scary Jio and ran home to hide in the corner.

Bharti Airtel has taken what some people might describe as the more obnoxious route. Throw the cash around and buy everything in sight. Show everyone that you are likeable because you have a big bank account. Earlier this year it bought the Indian operations from cowering Telenor, and in October it purchased Tata Teleservices.

Who knows what the right response to the Jio challenge is, but at least Bharti is doing better than RCom.

Lack of brotherly love leaves RCom circling the drain

It’s a tale of two billionaire brothers having very different experiences in the telco space. Reliance Jio is flying high, its quarterly report implies Reliance Communications is dying a slow and painful death.

The numbers are not pretty at all. Total revenues for the quarter stood at roughly $407 million, compared to $768 million in the same period for 2016. Reliance Communications also lost $431 million this quarter, compared to a profit of roughly $9 million in 2016. The only number which increased was the one you didn’t want to, expenses; up to $839 million from $804 million.

This makes for a company which is in a lot of trouble; when the loss column is larger than the total revenue column, you have to start wondering what the point is. That said, doing some simple maths, this should come as little surprise. During this quarter in 2016, expenses exceeded total revenues, though the company made a profit. Some might argue the profit didn’t come from a solid market performance, but creative accountants, therefore there was no foundation for the company to mount a defence against an aggressive disruptor.

The Indian furnace is starting to get burn, and it starting to look like Reliance Communications can’t handle the heat. And just to add fuel to the flames, the team has also said it has missed two bond repayments in recent weeks. Things are not looking healthy.

Reliance Communications will blame Mukesh Ambani, the brother of its own CEO Anil Ambani, and his Jio army, but it has been quite clear for some time this is not a telco which is in a healthy position. Perhaps all big bro did was to highlight the quite glaring inadequacies in the Reliance Communications business. This could be confirmed by a number of different factors.

While there has been a steady decline in share price over the last three months, as the Reliance Jio business continues to tear up the Indian rule book, this is only the tip of the iceberg. Share price in Reliance Communications has been heading towards for more than four years. It is 92.59% lower than September 2013, the highest point in the last five years.

Subscriptions have also been heading in the same direction. According to Ovum’s WCIS, total subscriptions stood at just over 100 million in December 2015, though this has steadily decreased to 77 million as of this September. Over the same period, market share has declined from just below 10% to 6.4%.

One of the reasons India was prime for pricing disruptive is customer stickiness. While mature markets have transferred many of their customers to the more reliable and secure postpaid tariffs, the majority of India’s population has remained in the prepaid space. It makes gaining customer subscriptions easier, as they are not tied into 12-18 month contracts, but also means a business is much more vulnerable to disruption.

Going back to September 2015 again, Reliance Communications proportion of postpaid stood at 6.63% which was above the country’s average (5.44%), but still left the business at risk. Moving forward to today, the country’s average has increased to 7.8%, as has the split for many of Reliance Communications’ rivals. However, its own proportion of postpaid customers has decreased to 3.95%, leaving it in an even more precarious position, susceptible to the risk of more customers being easily stolen.

Combining all these factors reveal a business which has not been in good shape for some time. Big bro might have started stealing the life jackets, but Reliance Communications has been circling the drain for a while.

Sharks circling Reliance Communications but Jio remains quiet for now

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.