A telecom tower stands on top of a building. (Photographer: Susana Gonzalez/Bloomberg)

Telecom A Money Guzzler, Even Tatas Had To Gift It Away, Says Anil Ambani

Months after voicing fears of an emerging monopoly in the sector and a forceful shutdown of Reliance Communications Ltd.’s consumer business, Anil Ambani today said telecom has become a money guzzler where only those with deep pockets can survive.

Even the “mighty” house of Tatas had to “gift away” their telecom business (to Airtel), Ambani asserted, sounding bitter about the regulatory framework, saying the long time taken to clear RCom’s merger with Sistema Shyam Telecom represents the “unease of doing business”.

“This is a crisis of the wireless telecom sector and it has engulfed many, many people and many, many companies. If it is the mighty house of the Tatas who had to gift their business, then very little has to be said about other corporate groups. The writing was on the wall,” the embattled RCom chairman told reporters announcing yet another revival plan for his nearly crippled telecom business.

Also Read: RCom To Exit Debt Recast Plan With Zero Write-Offs To Lenders

It can be noted that the entry of his elder brother Mukesh Ambani’s Reliance Jio which made the largest revenue earner voice calls free and priced data aggressively, has wrecked the financials of every company and resulted in a massive consolidation in the sector with Vodafone and Idea announcing a merger in March to stay floating.

“It's a clear signal that this is something which is not for 10 players to enjoy. This is more for 2-3-4 players to enjoy and those who have either unlimited money or those who have the ability to raise unlimited amount of money,” Ambani said, without naming any company.

You really need a pipeline into the RBI’s printing press if you want to be in the wireless business because it is a guzzler of currency, every minute, every hour and every single day.
Anil Ambani, Chairman, Reliance Communications

After the failure of its debt-reducing plans like sale of the tower unit and a merger with its immediate rival Aircel, RCom was forced to exit the flagship consumer facing business in this November and also charted a future course which will limit its offerings to the enterprise segment going forward.

Ambani, who entered the telecom business in 2002 after inheriting it as part of a truce to the bitter family feud following the death of his father, said the telecom business depends on continuous investments due to changing technologies and also the necessity to take services to newer pockets along with infrastructure development.

"You are on a perpetual treadmill. Capex never ever stops, it is every day. You got to be really geared in terms of your balance sheet, in your cash flow, in financial structure to do that," he said.

Also Read: RCom To Sell DTH Unit To Veecon Media And Television

The comments come months after Ambani had told his shareholders that the sector was in ICCU and warned of a monopoly in the sector.

It can be noted that RJio is tipped to be one of the frontrunners in the distress sale of spectrum which RCom will be undertaking to avoid the consortium of 35 lenders from taking over the company as part of debt reduction.

Also Read: Billionaire Sees More Telecom Price Pain as India Mulls Relief

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