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It's personal: Why Mukesh Ambani pulled out all stops for the Reliance Jio 4G launch

For the businessman tycoon, telecom services are a way to fulfill a dream he inherited from his father.

The media blitz surrounding Reliance Jio's launch on Sunday of 4G services (albeit for its employees, as of now) has been as overwhelming as the launch event itself. The press was filled with reports of the event, which featured actor Shah Rukh Khan. Twitter was filled with message from other Bollywood celebrities expressing their support for the new telecom service.






But the real story is hardly about the rollout of a broadband service. It’s actually  about why the launch is a personal triumph for Mukesh Ambani, the chairman and managing director of Reliance Industries Limited. It’s the culmination of an ambition to enter the telecom sector that Ambani has held for more than a decade.

The story goes back to December 2002, when the undivided RIL launched Reliance Infocomm. The company had been Mukesh Ambani 's baby all the way, with sibling Anil Ambani  having no representatives on the company’s board of directors. Infocomm’s parent company was Reliance Communications Infrastructure Limited, which held a majority stake. Mukesh and Nita Ambani  indirectly owned 50.5% of the company through nine holding firms; 45% of the shares were held by RIL.

A year later, on December 28, in 2003, the birth anniversary of Mukesh's father, Dhirubhai Ambani, Infocomm launched its services. The marketing strategy was aggressive and all-pervading. It was Mukesh Ambani's own way of paying homage to his father, for he believed that Dhirubhai had chosen him to lead Reliance into the 21st century. The market campaign hovered around Dhirubhai Ambani’s dream of making voice calls on mobile phones cheaper than a 50-paise postcard. That’s what Infocomm did. Call rates soon became affordable.

The split

But in less than two years, Mukesh Ambani lost control over Infocomm. In June 2005, as the two Ambani brothers had a falling out, matriarch Kokilaben divided the assets of the Reliance group between them. Mukesh Ambani had to relinquish Reliance Infocomm, which together with Reliance Energy and Reliance Capital went to his younger brother, Anil. Moreover, there was a catch: a non-compete clause was inserted in the truce. In other words, Mukesh Ambani could not venture into telecom again.

Not only did Mukesh Ambani have to give up a company that promised to deliver his father's dream, he had to sacrifice a cash cow as well. During the Ambani feud of 2004-’05, the allegation that the Anil Ambani camp levelled against Mukesh Ambani was that the elder brother was using cash from the publicly-listed RIL to finance this personal telecom venture.  While RIL paid a premium to purchase shares in Reliance Infocomm, Mukesh and his friends were alleged to have got them for virtually free. As the worth of the telecom project rose, the value of personal stakes multiplied hundreds of times.

The loss of the firm became a sore point for Mukesh Ambani. The blister surfaced in June 2008 when Anil announced that RCom (the new avatar of Reliance Infocomm) would merge with South African telecom giant MTN. Mukesh Ambani opposed the idea tooth and nail. He pointed to a clause in the family memorandum of understanding according to which neither of the brothers could sell their stakes in existing companies without granting the first right of refusal to the other. So Anil Ambani had to first offer the shares to his brother and, only if the elder Ambani refused to buy them, could he sell those to MTN. With neither brother budging an inch, RIL initiated arbitration proceedings against RCom a month later. The MTN-RCom negotiation were called off the next day.

Calling truce

The brothers buried the hatchet only after a May 2010 judgment of the Supreme Court, which ruled in favour of Mukesh Ambani in the dispute over the supply and pricing of gas from the Krishna-Godavari basin. Later that month, the old non-compete agreement was scrapped, and it was agreed that each group could now enter the other's territory. In June, RIL announced plans to enter the broadband services industry, and bought a 95% stake in Infotel Broadband Services, a successful bidder in all 22 telecom circles for which public auctions were held. Infotel became Reliance Jio Infocomm Limited in January 2013. The two brothers subsequently struck a deal on the sharing of infrastructural facilities, which was formally announced in June that year. It made good business sense for both. Jio wanted to hit the market soon and Reliance Communications already had the network, and the latter was heavily in debt.

Now, with the launch of 4G services on Monday, telecom has come a full circle for Mukesh Ambani. After ten gruelling years he is back in the space that he had wanted to create for himself. The glitz was essentially not so much about a product launch: it was Mukesh Ambani's way of telling the world that he is back.

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HBX Platform | Courses offered in the HBX CORe program
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HBX Interface | Students can view profiles of other students in their cohort
HBX Interface | Students can view profiles of other students in their cohort

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HBXers at ConneXt, with Prof. Bharat Anand
HBXers at ConneXt, with Prof. Bharat Anand

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