A new telecom giant

The telecom industry’s process of consolidation took a leap with the merger of MTS and Aircel with Anil Ambani’s Reliance Communications (RCom), that had been on the cards for a while, and the markets were waiting for the announcement to fructify. It catapulted the merged entity to third place in the highly-competitive telecom sector. More important is the relief it gives the Anil Ambani group by reducing it huge debt burden by Rs 20,000 crores. Its overall debt is Rs 42,651 crores. Once the sale of its telecom tower arm is complete, the debt could be further reduced to Rs 20,000 crores. Sources say the process should be complete by the end of this year.

This development is a signal to all other telecom firms that are struggling with high debts to think in terms of consolidation as a way out of their predicament. It would lead to more efficient use of a scarce resource like spectrum and lead to overall efficiency, cost savings and rationalising the use of towers. Consumers too will in the end stand to benefit from efficient services and at reasonable costs. The younger Ambani’s RCom is already offering its 4G service on the back of older brother Mukesh Ambani’s Reliance Jio to its CDMA customers at a significantly discounted price. Earlier RCom, that today is the largest owner of spectrum after the merger, had a spectrum trading and sharing agreement with RJio, which further established the efficient use of spectrum and highlights the virtual merger of RCom with much later arrival RJio.