Times Magazine once attributed Ambani family as the ‘ones who owns India.’ Later, following the death of the patriarch Dhirubhai Ambani, many thought the businesses will be taken over by Mukesh Ambani due to the way he resembled his father as a businessman. However, the family feud between him and his brother Anil Ambani made many to believe that the Reliance empire is falling; nothing happened and the Reliance thrived and emerged as the most valuable business house in the country. However, things were not that good for Anil Ambani, the younger brother. Though the partition left him with a diversified portfolio, he couldn’t be as successful as his brother Mukesh Ambani. Whereas his elder brother improved the net worth of the company over the years (from $21 billion in 2011 to $41 billion in 2017), Anil Ambani’s net worth declined with time (from $8 billion in 2011 to ~$2 billion in 2017). The recent decision of Mukesh led Jio Network to invest in Anil’s debt-ridden telecom firm is the sign of changing times. This move brings in a ray of hope for the economy from a macro-perspective, as the business war between the duo once used to create high levels of uncertainties in the market. At the same time, this will also lead to a further consolidation and monopolization in the telecom sector, causing a serious threat to the competitive nature of the market.
The story of this family feud started within few months after the death of Dhirubhai Ambani though the fiction between the brothers was there even before the death of the father. The crisis leveled to such an extent that at one point of time, even the Finance minister of the country had to request them to go in peace as the tension between the Ambani brothers caused a lot of uncertainties to the markets. However, towards the end of the decade, they reconciled and started attending events sharing the same venue and stage.
As the two groups of businesses are in the path of reconciliation, there are few points worth discussion. Though it is a pure business development, it will have serious implications for the nation’s economy. First, the competition in the telecom sector of the country will further intensify as the Jio network will now expand further with the optic fibre and tower network of Reliance communications. In the words of Anil Ambani, telecom sector today is an area which is only accessible for those with ‘deep pockets.’ As the money of Mukesh and the network base of his brother Anil’s firm comes together, this will further make the road ahead difficult for the fellow companies like Airtel and Vodafone-Idea. This will also ensure that that the telecom race would be now between the four important firms namely Airtel, Vodafone-Idea, State-owned BSNL and Jio network. Though this is aimed at the expansion of the businesses from the perspective of the brothers, this would be a matter of concern for the consumers. Though Jio is offering a lot of freebies to the customers, it is highly doubtful that they will continue giving so in the long-run.
Unless and until the company generates the sufficient levels of revenue, this model won’t be sustainable in the long-run. In such a scenario, the company may either go for the suspension of such freebies or will monopolize through predatory practices. This, in turn, will reduce the market share of the competing firms, which in turn may make business unsustainable. Such monopolistic tendencies won’t be beneficial for any forms of the market.
Another implication is that this will come as a relief for the debt-ridden Anil Ambani group. Now given the total debt will get reduced through this deal, the firm can ask for further extensions for the repayment of the remaining money loaned from various creditors. This will not only improve the future prospects of the Anil Dhirubhai Ambani Group (ADAG) but will also help them to divert their attention to other areas of business such as defense, finance etc.
The move comes as both a relief and worry for the government due to two reasons. First, the cooperation between two firms means that the lenders, primarily the banks, will get their money back without default. As the government is rigorously pushing towards bringing down the levels of non-performing assets with the banks, the rescue of the younger brother by the elder is a matter of relief. However, this also becomes a matter of caution as both the government and the telecom regulator TRAI must now work towards making the telecom sector more healthy and competitive.
History narrates the stories of several siblings throughout its course of time from the ancient period to modern days. While some of them are tragic, many are of success and collaboration. Whereas the chronicles of Cain and Abel is of sibling rivalry, the life of Wright brothers brought in hope for humanity. Dassler brothers quarreled, only to form two of world’s major sports manufacturing companies, Adidas and Puma. As the Ambani brothers are now ‘relying on the idea of brotherhood’ to settle the decade-long business and family tussle, it is yet another milestone in the narrative of India’s largest business family. How the story of Ambani brothers, their infighting and later reconciliation gets written on the golden pages of history is something that time will tell.
-Contributed by Jiss Palelil
Picture Credits: finance.yahoo.com