Indian Telecom Opertors Cup of Woes
Indian Telecom Operators have seen Bad News hitting them one by one in a unrelenting way for the past one year
Reliance Entry could prove to be the Final Straw
Reliance Industries (RIL) is India’s largest privately owned company which recently rescinded a no-compete agreement with the ADAG Group.This frees RIL from entering India’s fast growing Power,Telecom and Financial Services sector.RIL has lost no time in doing just that.It bought 95% stake in Infotel,a small no-name company which bought Broadband Wireless Access (BWA) spectrum in all the 22 circles in India for ~$3 Billion no doubt with prior assurances from RIL.Note RIL has a massive cash war chest and proven execution abilities.Its entry will surely be a huge headache for existing telecom companies as it will certainly aim at the No.1 spot.With Voice Communications fast becoming a commodity with little profits,Data Communications was supposed to be the next big Cash Cow.Now with RIL planning to take that over with plans of making a big splash in providing Data Services over Wireless Broadband,the Telecom Operators are in severe danger.Most Telcos have already rolled out wireline and wireless broadband services and earn a small fast growing chunk of profits from this segment.But with Reliance entering ,expect a major Tariff Decline in this segment as well.Good News for the Indian Consumer and More Bad News for the Telecom Operators.
Five years after exiting telecom business, Mukesh Ambani-managed Reliance Industries Ltd (RIL) on Friday re-entered the sector by acquiring Infotel Broadband, the only company to have got the all-India broadband wireless access (BWA) spectrum. RIL will invest Rs 4,800 crore by subscribing to fresh equity capital and own 95 per cent equity in the company, making it a subsidiary of RIL. Mukesh exited telecom business in June 2005, when, following the settlement, Reliance Infocomm went to Anil, who changed its name to Reliance Communications.
This was a setback for Mukesh as he had conceptualised RIL’s first serious foray into telecom.Nineteen days after a May 23 settlement that nullified a non-compete clause between the brothers, RIL chairman and MD Mukesh was optimistic.
“We see this as next wave of value creation opportunity in the wireless broadband space,” he said. “This will polevault India’s economy into the digital world at an accelerated pace while creating next generation tools that will enhance productivity and will create world class consumer experiences.