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    Reliance Communications

    Endowed in India on 31 July, 2002 under the brand signature of Reliance Infocomm Limited, Reliance Communications reached grandeurs of jubilation during its time but consequently slipped into extreme levels of trouble, and therefore, finally filed for bankruptcy in 2019.

    Initially managed by both the Ambani brothers, the company started its operations by extending CDMA2000 service, an emerging technology at the time, across the nation, though it only sustained 2G and 3G. While on the opposite side, rival brands like Airtel and others were utilizing GSM, capable of sustaining 4G as well, since then itself. Therefore, when 4G arrived, RCom squandered. Analysts believe that this decision of choosing CDMA over GSM was an enormous blunder and a key reason for the company’s fall.

    Supplementing fuel to the downfall, trouble started bubbling among the brothers due to complicated personal reasons. In 2005, after the intervention of their mother, the entire conglomerate was divided into two. Following the split, Anil Ambani took over the telecom arm amongst many others as part of a greater agreement. Besides, a non-compete pact too was signed between the brothers. This split, therefore, led to a change in the decision-making apparatus of Reliance Infocomm Limited that was later renamed Reliance Communications Limited in 2006.

    Over the years, competition in the telecom industry enhanced significantly with numerous opponents contending for higher subscribers thus adding to its distress. Telecom sector is well known for its capital-intensive nature and it has continually been hit with tariff wars and collapsing profitability, and RCom was no anomaly. As Anil remained in contention to develop the business aggressively, the necessity for investments went up, which proposed more borrowing consequently beckoning more trouble.

    In another remarkable development, as soon as the non-compete clause ceased in 2010, Mukesh acquired Infotel Broadband registering his invasion into the telecom business and, eventually in 2016, he took the industry by storm with the launch of Reliance Jio Infocomm. Market spectators have perceived that RCom’s position could have been very different, had Anil not been blocked by Mukesh to proceed with a merger with South Africa’s MTN. 

    Furthermore, Reliance Communications in 2016 announced that it had attained Sistema Shyam TeleServices Limited (SSTL, operating as MTS India) in an all-stock arrangement. Reliance Communications, as per the agreement, assumed liability for payments that MTS owed the government for spectrum purchases, amounting to ₹ 392 crores each year for ten years. Because of the agreement, Reliance received MTS India’s endorsers and SSTL’s range in the 850 MHz band. This deal too didn’t go very well for RCom.

    Rcom also cancelled a merger agreement with Aircel citing delays by entrenched competition as the reason. If the merger would have taken place, it has been forecasted to have helped the company repay ₹ 25,000 crores of debt.

    Finally, in 2016, Rcom’s inability to repay the dues pertaining to a deal made in 2013 with Ericsson served as the frosting on the cake of its destruction. The direct result of the regular non-payments was that in September 2017, Ericsson terminated the agreement and approached the NCLT to recover dues of ₹ 1100 crores. NCLT launched insolvency proceedings even as RCom tried to trade spectrum and other assets. RCom, during the proceedings, negotiated and reached an out of court settlement with Ericsson, agreeing to pay ₹ 550 crores with a personal guarantee from Anil Ambani on the condition of withdrawal of insolvency proceedings. The Supreme Court re-examined the matter in August 2018 and directed RCom to pay up Rs 550 crore to Ericsson by 30 September. RCom failed to comply and subsequently sought an extension of 60 days. Ericsson filed a contempt petition in the Supreme court following which the court held Anil Ambani and three others guilty of contempt of court and ordered them to execute payments by 19 March.  Mukesh Ambani helped Anil with a bailout of ₹ 463 crores just a day before the expiration of the deadline and thus saved his brother from being sent to jail.

    Reliance Communications, once an empire, has now been reduced to ashes, all courtesy to the heedless growth strategies and an unchecked ambition!

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