How Mukesh Ambani-led Reliance Jio drove Anil Ambani's RCom out of 2G business

Anil Ambani-led Reliance Communications has decided to shut down its 2G mobile phone operations as the business is no longer viable due to the price war unleashed by elder brother Mukesh Ambani's Reliance Jio which is offering free voice calls and dirtcheap data. The younger sibling had inherited the telecom business of the Reliance group following the division of the family empire between the two brothers. However, with the non-compete clause in the agreement coming to an end, elder brother Mukesh has made a dramatic entry into the telecom sector and shaken up older players with his disruptive pricing.

RCom will be giving its 2G-based customers the option to switch to 3G or 4G based technology and has asked most of its employees to exit the company by November 30. The debt-ridden company will continue to operate 3G and 4G services till the time they remain profitable, industry sources said. A company official said 60 per cent of RCom customers, who are using 2G-based technology can switch to the RCom's higher technology or else port to another operator.

RCom executive Gurdeep Singh, is reported to have told employees : "We stand at a situation where we need to call it a day on our wireless business and this would bring the curtains down on our wireless business 30 days from now.'' Reliance Communications is also shutting down its direct to home television services from next month after it failed to find any buyer for the business.

The company will "continue to operate ILD voice, consumer voice and 4G dongle post paid services" and mobile tower business till the time they remain profitable and all the other business will be shut down, Singh has told staffers. RCom issued a statement saying : As already announced on 1st October 2017, RCom has decided to adopt a 4Gfocused strategy for profitable growth of its wireless business. Accordingly, RCom will be optimizing its 2G and 3G footprint, and related infrastructure and human resources, with effect from 30th November 2017."

The company's 4G-led strategy will be executed, as at present, on the back of capital-light access to India's most extensive 4G mobile network, through already operational spectrumsharing and ICR arrangements with Reliance Jio, the statement added. The company's tower business will remain operational since it is bringing in business . RCom is still in talks to sell its stake in its tower unit to Canada's Brookfield to raise funds which it wants to use to repay banks and reduce its debt burden. RCom has a whopping Rs 44,000 crore in loans on its books and is facing problems repaying its dues as earnings have been eroded due to the disruptive pricing by Reliance Jio which is offering voice for free.

In a major setback for Anil Ambani, Reliance Communications had been forced to called off the move for a merger with Aircel blaming "legal and regulatory uncertainties, and various interventions by vested interests for having caused inordinate delays in receipt of relevant approvals for the proposed transaction." "Unprecedented competitive intensity in the Indian telecom sector, together with fresh policy directives adversely impacting bank financing for this sector, have also seriously affected industry dynamics,'' RCom had also said.