Anil Ambani says telecom sector in dire straits, warns of monopoly
Mumbai: Billionaire Anil Ambani on Tuesday said the telecom sector is in intensive care and the government and lenders are most at risk from the deteriorating health of the industry.
Ambani, chairman of Reliance Communications Ltd (RCom), warned that the market is heading towards a monopoly. He also promised to get RCom out of its difficulties by March 2018, saying its lenders are supportive of all its actions. With the entry of elder brother Mukesh Ambani’s Reliance Jio Infocomm Ltd, the market is “potentially” moving towards limited competition, Anil Ambani said, adding that he feared that it may turn into a monopoly.
“The wireless or mobility sector, from any dimension you look at, is in the ICCU. It is not in the general ward, it is not in the ICU, it is in the ICCU,” Ambani said at Reliance Communications’ (RCom) annual general meeting here. “It is a systemic threat for government, for its revenues, it’s a systemic threat for our banking sector and it is what I call creative destruction of a sector,” he said. Noting that the number of operators has reduced to six from over a dozen over the years, there was a sharp erosion in competitive landscape where nearly all global companies who were here have exited.
“I am sure they see things that allow them to write off large amounts of money and exit India. It cannot be the power of the market that is forcing them to leave but it has got to be from other dimensions of the sector which is forcing them to leave,” he said. Ambani said fresh lending to the sector has completely halted after Reserve Bank’s caution to banks in April. He wondered how can the once-sunshine sector maintain service quality as it requires Rs1 trillion in investments annually. Warning that the industry is heading towards a monopolistic situation, he said “If customer is supreme and consumer is king, can we afford to be a oligopoly, a duopoly or a monopoly?”
Ambani claimed that RCom, which has a debt of Rs45,000 crore and has been given a moratorium till December, has the support of all its lenders including the Chinese ones and promised to get the company back on track. “All I can assure you today is that we have multiple options in front of us, we have got plans, we are in discussions with all our lenders, all our lenders are fully supportive and we will find appropriate solutions in the course of this financial year or earlier,” he said. He did not offer specifics of the plan or the way forward for impending deals like merging with Aircel. The merger with Aircel has gone to the NCLT after some vendors like Ericsson questioned the deal. Owning up to the difficulties, Ambani said that the promoters will bear the “maximum pain” to get the sector back and “minimum pain” to the lenders as the problem is due to no fault of theirs. He also said the company is not looking for any special dispensation to come out of the stress, conceding that it does not “deserve” it, nor does it “want” it. Ambani flagged legal and regulatory interventions as potential impediments but said RCom respects those.
Pointing to a shareholder, Ambani said his interventions led to a one-year delay on the plan to merge with Aircel and added that the company will be writing to the regulators to ensure such “blackmailers” are not allowed into such forums. Ambani also wondered whether these delays are motivated, fielded by corporate rivals, or based on merits.
“We are not in any situation here to be tortured, tormented or blackmailed by anybody. We will do our best, we have various options.”
He said the stress is only in the mobility or wireless business, which is the largest contributor to the revenue, but all others like data centres, submarine cables etc. are doing good domestically and internationally. The company will focus on growing these segments, as it tries to come out of the difficulties.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.