Mukesh done to Anil what Anil did to Sunil : ET

RCOM chairman Anil Ambani had pulled off a coup when he landed an agreement for exclusive talks with MTN within 24 hours of Bharti Airtel pulling out of negotiations with the South African telco in late May.

Mr Ambani had seemed to have pulled the rug from under the feet of his arch rival Bharti Airtel chairman Sunil Mittal. But seven weeks down the line, it is another Ambani, older brother Mukesh, who seemed to have handed a second chance to Mr Mittal as Bharti looks to re-engage with MTN.

The intervention of the loquacious Samajwadi Party general secretary Amar Singh, a self-proclaimed friend of Anil Ambani, and rumours of high-level political attempts at mediation, added another twist to the saga.
The wheel seems to have come full circle from late May. Mukesh seems to have done to Anil what the latter did to Sunil earlier. Whether RCOM entered into negotiations with MTN once talks with Bharti had failed, or whether it was its eagerness to explore all options with MTN which resulted in the collapse of talks between the South African firm and Bharti, is a matter of conjecture.

Yet some industry sources share the view that that it was Anil’s offer of a ‘better’ deal that led MTN to call off its proposed merger with Bharti after both companies had signed a term-sheet.

But, just when it seemed that RCOM and Mr Anil Ambani were giving final touches to consummating a merger with MTN to create a global telecom giant with close to 120 million subscribers and a footprint stretching from the Cape of Good Hope to the Himalayas across 23 countries and covering a population of two billion, the elder Ambani, Mukesh, suddenly asserted Reliance Industries’ (RIL) right of first refusal (RoFR).

Industry sources say RIL’s claims of RoFR was what reportedly brought discussions between the Indian and South African telco to a standstill. A top industry source said the deal was doomed from the day RIL sent a letter to MTN, claiming its first right of refusal to any stake sale by RCOM.

The implication: After being pitted against each other (before the Reliance empire was split between the two brothers) and after having fought a slew of bitter corporate wars, Mukesh Ambani was well on his way to delivering MTN back to Bharti.

The drama intensified on Thursday after RIL said it had started arbitration proceedings against RCOM to thwart the latter’s merger with MTN. Even as RCOM dismissed RIL’s move and said the arbitration cannot be launched unilaterally and can only happen when ‘both’ parties refer the dispute to a person outside the court, the development only fuelled more doubts about the deal going through.

The past is perhaps the best indicator to explain the linkages between three of the country’s largest CEOs. The battle between the Ambanis and Mittal is nearly a decade old, while that between the Ambani brothers has been on for the past three years.
On the telecom front, while Mr Mittal was earlier pitted against the older Ambani (Mukesh), he has been fighting younger brother Anil Ambani for the last three years. Bharti is currently miles ahead of RCOM in India, but tables would have turned if the latter had clinched a deal with MTN.

Little wonder that Bharti wants to revive talks with MTN considering that a merger between RCOM and the South African telco will create a global telecom giant with a market cap of over $60 billion, revenues of $14.4 billion, an operating profit of over $6 billion and assets worth $26.8 billion, and emerge as the second-most profitable operator in emerging markets after China Mobile.

The stakes are high as such a merger will overshadow Bharti, which currently has a market cap of a over $40 billion with close to 70 million subscribers and no significant presence outside India.

At the same time, it must be pointed out that Mr Mittal has had the upper hand in the telecom space only over the last two years. In 2005, RCOM (then called Reliance Infocomm and controlled by Mukesh) had not only managed to dislodge Bharti from its market leadership position, but nearly pushed Mr Mittal to the edge.

Mr Mittal himself has acknowledged this and in an earlier interview told ET that at the height of the WLL crisis in 2002, Battleship Bharti was a “machine that was creaking”. The pace of Infocomm’s national rollout, coupled with cheaper tariffs and handsets, saw the company shoot past Bharti in subscriber numbers and forced Mr Mittal to invest beyond his company’s means and left Bharti on the verge of collapse.

Bharti then made a slow and steady comeback even as RCOM was busy fighting battles on several fronts, widespread billing problems, trouble with the law for alleged ‘illegal’ routing of international calls, a down market image and instability in management.

RCOM, under Anil Ambani, could have cut Bharti to size last year had it been successful in its bid for Hutchison Essar, the CDMA major would have had over 50 million subscribers and close to a 40% market share, way ahead of Bharti with 30 million subscribers.

Mr Mittal had then played spoilsport by providing the no-objection certificate (NOC) to Vodafone, which enabled the UK-based telco to outbid RCOM and gain a controlling stake in Hutchison Essar. Since then, both Mr Mittal and Mr Anil Ambani have been involved in several battles, ranging from spectrum to RCOM’s planned entry into the GSM space to Bharti refusing to bail out Reliance Communications earlier this year during the undersea cable crisis.

The political scenario at the Centre may yet allow Ambani junior to have a one-up on Mr Mittal. This is because, SP’s Amar Singh has been pressing upon the PMO to impose a heavy one-time fee on GSM operators who hold spectrum beyond the 6.2 MHz.

Last year, RCOM chairman Anil Ambani had written several letters to both the PM and the communications ministry on exactly similar lines. The UPA may be forced to concede to Mr Singh’s demands this time around, ET has learnt that the PMO has asked both the communications ministry and the finance ministry to look into Amar Singh’s demands.
Amidst all this, the last three years have also seen both the Ambani brothers involved in a series of bitter wars and endless disputes across sectors from gas to power to aviation to telecom.

The 2005 family agreement between both brothers exists only on paper as both Ambanis have dragged each other to courts on several issues, the biggest of which is the supply of gas by Mukesh’s RIL from the Krishna Godavari basin for Anil’s upcoming $8-billion project in setting up a 7,450 MW power plant in Dadri, UP.

RIL and Anil’s RNRL have been locked in a prolonged legal tussle over the gas-sales agreement signed in 2005, by which RIL had committed to sell a portion of the KG basin gas to RNRL at a fixed price. However, differences arose after the petroleum ministry rejected the gas sales contract between the two.

In an interim order last year, the Bombay High Court had restrained RIL from selling the gas to any third party, with the purpose of protecting the interests of R-ADAG. The case is now before a division bench. RIL may sign agreements for the sale of gas to third parties only after the court rules in its favour. The case will come up for hearing on July 22.

The next bone of contention for the feuding brothers was the Rs 7,500-crore Mumbai Trans-Harbour Link project to link Sewri in south Mumbai with Nhawa near Jawaharlal Nehru Port Trust (JNPT) in Navi Mumbai.

While Mukesh Ambani bagged the project initially, ADAG, whose own bid was rejected on the basis of financial parameters, contested the decision. The Supreme Court later upheld Anil Ambani’s appeal. However, the Maharashtra government rejected Anil Ambani’s bid as ‘unrealistic’, and instead hiring Maharashtra State Road Development Corporation to construct the sea bridge.

The brothers had also put in separate bids for a 7.5-hectare plot in Mumbai’s Bandra-Kurla Complex (BKC). Elder brother Mukesh beat Anil to it, acquiring the plot for Rs 1,104 crore, where he plans to construct a convention centre with a 2,000-seat auditorium.

Much to ADAG’s consternation, the state government increased the floor space index (FSI) from one to four soon after Mukesh’s successful bid. The Anil Ambani group’s objection that it was done after the bid was announced was turned down by the Bombay High Court.

The Ambanis are not only fighting it out over new, upcoming projects. Their disputes extend to projects bagged prior to the demerger. The brothers are fighting a case against each other in the Bombay High Court over a plot of land at the Chhatrapati Shivaji International Airport, which was allotted by the Airports Authority of India (AAI) to RIL subsidiary Reliance Transport and Travels (RTTL) in 2000. However, RTTL went to Anil Ambani after the brothers parted ways. Both brothers are now staking claim to the same hangar space at the airport. The case comes up for hearing next on July 24.
Meanwhile, Mukesh and Sunil had moved their battlefield to retail. In 2006, prior to making his retail debut, Mukesh almost cleaned out Sunil Mittal’s agri-venture FieldFresh Foods by poaching nearly 70 top employees.

According to industry sources, Mukesh’s move had put the brakes on Bharti’s plans for a quick entry into the domestic food retail space. All through 2006 and 2007, both Bharti and Reliance were involved in a battle to woo farmers in Punjab after both companies had identified this state as a key hub for their retail and agri business.

Mukesh had a headstart in the retail war and announced plans to invest around Rs 25,000 crore with a revenue of Rs 90,000 crore by 2010. Sunil, in, turn came back by tying up with the world’s largest retailer Wal-Mart.

However, Mukesh continues to hold a distinct edge, Reliance Retail has a pan-India presence across several formats and has over 600 stores, while the Bharti Wal-Mart combine is yet to open its first outlet. Soon, Anil Ambani may add a new dimension to the retail war, industry sources say the ADAG group has plans to foray into select retail formats.

Yet, it’s telecom which is the most decisive to the fortunes of these three corporate czars. With the MTN deal coming unstuck, Anil Ambani seems to have lost the opportunity to be propelled to the global stage, gaining the independent identity he’s been searching for since the family de-merger and the chance to score over both his elder brother Mukesh and rival Sunil Mittal.