You might be surprised to know that Jio is not the very first initiative that Reliance Communications started to digitalize India.
In 2002, Reliance Infocomm had disrupted the telecom sector by offering free unlimited incoming calls along with a free mobile phone for Rs 500 handset. Former Indian cricketer, Virender Sehwag was also hired to advertise the product with a catchy jingle ” Karlo duniya mutthi mei.”
But the troubles started when RCom realized their CDMA services generated fewer revenues than GSM. As a result, they invested heavily in the rollout of GSM services which eventually pushed them into massive debt, telecom tariff battles, 2G scams, and many more.
Read on to find out more about the rise and fall of Reliance Communications under Anil Ambani.
THE RISE OF RELIANCE COMMUNICATION
In December 2005, the Ambani brothers announced a split in their family business. While Anil took over the telecom, power generation, and financial services, Mukesh kept the oil-refining and petrochemicals business.
In 2002, Reliance Infocomm was introduced under RCom and it used the CDMA platform that was limited to 2G and 3G but it eventually started investing in the GSM and laid out services within 12 months. He attracted users with 60 percent cheaper rates than its opponents. While the competitors charged Rs. 4-Rs. 6 per minute, Rcom offered it for free and also offered a free mobile phone. His goal was to reach 100 million users through this pricing strategy.
With the introduction of 3G, he decided to mark his entry and sweep the markets once again. Reliance Communications (RCom) shelled out Rs 8,500 crore to buy a 3G spectrum in over 13 circles, which included the expensive Delhi and Mumbai circles.
The venture seemed to be working, five years after acquiring the family settlement, he had catapulted RCom to make it the second-largest telco in India with a four-fold increase in its clientele that reached 125 million by December 2010.
But the success eventually came to an end when the technology advanced to 4G, RCom began losing its customer base.
THE FALL OF RELIANCE COMMUNICATION
During RCom’s 14th annual general meeting in September 2018, Ambani announced, “We have decided we will not proceed in this sector. Many other companies have taken a similar call. This is very much the writing on the wall. As we have moved out of the mobile sector, we will monetize our enterprise business at an appropriate stage. Reliance Realty will be the engine of growth for the future of this company.” With this, Rcom chose to end its services in 2017 and sell its assets to pay off its debts.
Moreover, Mukesh Ambani made his entry into the telecom sector. His debut in this sector made it difficult for his competitors to keep up with, including RCom. He began with the taking over of Infotel Broadband for Rs 4,800 crores until the launch of Jio in 2016. RCom lost over 98% of its value despite having a market capitalization of Rs. 1.65 lakh crore at its peak in 2008. Eventually, R-ADAG also reduced its involvement in the entertainment industry in 2016. To subdue the debt of Reliance Capital, it traded a portion of its TV business to Zee Entertainment for Rs. 1,872 crore and a 49 percent stake of its FM radio services to Zee Media. It also sold its other TV businesses – Reliance Big Broadcasting, Big Magic and Azalia Television. Adding to the misery, Ambani was forced to sell off Reliance Power assets due to his inability to pay off debts. On September 2018, he announced that the firm’s 24,000 MW of power generation plants are shut and investments worth Rs. 1.2 lakh crore are stuck. This was followed by various political accusations and speculations made by Rahul Gandhi regarding a deal between India and France over the delivery of 36 Rafale jets to the Indian Air Force, he said it was operated mainly to benefit Ambani. Gradually, in February 2019, Supreme Court stated that Anil could face jail term if RCom failed to pay back $77 million to Swedish firm Ericsson for outsourced services. However, he was bailed out by Mukesh thereby marking the end of the RCom empire.