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India’s billionaire Ambani brothers have overcome their famously testy relationship to agree a telecom infrastructure deal that will further expand the footprint of disruptive new entrant Reliance Jio.
The two brothers became direct competitors for the first time last year when Mukesh Ambani’s Jio launched a price war on consumer telecom incumbents including Reliance Communications, run by his younger brother Anil Ambani.
Jio, a subsidiary of Reliance Industries, used aggressive mobile phone pricing to squeeze Indian industry margins over the past year, pushing RCom to the brink of insolvency.
Now RCom is leaving the consumer telecom business and shedding assets in an effort to repay Rs457bn ($7bn) of debt.
Jio emerged on Thursday as the highest bidder for RCom’s spectrum for high-speed mobile broadband, 43,000 telecom towers and a national optical fibre network, as well as a swath of real estate holdings.
RCom did not reveal the sum agreed, but Anil Ambani said this week that he expected the sale to raise about $3.8bn.
The asset purchase returns to Mukesh Ambani control over a business that he spearheaded from its foundation in 2002, before agreeing to cede control over it to his younger brother in 2005.
That agreement, brokered by their mother, came amid an acrimonious breakdown of the brothers following the death of their father Dhirubhai, founder of the Reliance conglomerate. At that time, Anil Ambani took charge of the group’s financial and infrastructure arms, while Mukesh Ambani won control of the core oil products business.
Anil Ambani’s company will be able to reduce its debt through the sale proceeds, which will go entirely to creditors, and by transferring spectrum liabilities owed to the government to Jio. Jio had already been using the spectrum under an infrastructure-sharing agreement signed by the companies two years ago.
The sale underscores the extent to which Mukesh Ambani’s part of the divided Reliance empire has outstripped that of his younger brother. Forbes India this year estimated his personal wealth at $38bn, compared with $3.2bn for Anil Ambani.
RCom said it “expects the transactions to close in a phased manner between January and March 2018, subject to lenders’ and other applicable approvals.”
The deal rounds off a tumultuous year for RCom, which had hoped to remain in the Indian mobile race through a merger with peer Aircel, but walked away from the deal in October amid resistance from its creditors.
RCom’s lenders, who had accepted a moratorium on debt repayments until the end of next year to give time for the Aircel deal to go through, then put the company under growing pressure, with China Development Bank filing an insolvency petition last month.
Shares in RCom jumped 30 per cent on Tuesday after it said the lenders had approved a new plan that would see it exit the retail telecoms space, leaving it with a far smaller operation serving business customers.
Mr Ambani promised that the resolution would not require lenders to write down any debt — a politically sensitive subject in recent years in India, where distressed loans to large companies have become a crippling burden on the banking sector.
Jio confirmed that it had signed a “definitive agreement”, while noting that the deal remained subject to the approval of regulators and creditors. As of October 31, Jio had attracted 145m subscribers since its launch in September 2016.