He said the “creative destruction” of the telecom industry, underlined by high cost and predatory pricing by some, had created an “oligopolistic structure that was now rapidly moving toward a duopoly, and could eventually become a monopoly,” with “rules of mobile telephony” having been rewritten in the last two years.
The brutal price war and high debt has forced most smaller operators including RCom to exit, with the only private sector survivors being Bharti Airtel, Vodafone India and Idea Cellular, though the latter two have been forced to merge. And with the tariff war showing no signs of ebbing, some fear that the sector may lose more players, though the government has ruled out such a possibility.
RCom also had to shut its wireless business late last year and is selling related assets to Reliance Jio to reduce its Rs 46,000-crore debt. Ambani said that his group intended to exit the telecom sector completely over time. “It would be most appropriate for me to thank and acknowledge the support (and) guidance extended to RCom and me personally by my brother, Mukesh bhai Ambani,” he told shareholders.
Last year, Mukesh Ambani-led Jio had agreed to buy RCom’s wireless assets, by inking an accord that was announced on father Dhirubhai Ambani’s 85th birth anniversary. RCom had inked definitive binding pacts with Jio for the sale of its wireless spectrum, tower, fibre and media convergence node (MCN) assets as part of a Rs 18,000-crore asset monetisation plan to repay its 39 lenders.
While sale of fibre and MCN is through, raising some Rs 5,000 crore, clearance for the sale of spectrum is stuck in the Department of Telecommunications (DoT) which has sought some dues to be paid before approval. RCom has challenged the demand in court. Shares of RCom plunged over 6% to close at Rs 16.15 on BSE on Tuesday. Rohan Dhamija, partner and head of India and Middle East, Analysys Mason, said, “There’s still lack of clarity on actual closure of RCom’s asset monetisation plan, which has been talked about for months on end, and fall in the share price today is possibly a reflection of that continuing uncertainty.”