Mukesh, Anil bury hatchet with $220mn telecom pact

Agencies/Mumbai

Billionaire Ambani brothers, who fought a very public feud for spoils of their father’s business empire, yesterday signed a $220mn deal in the first tangible sign of a corporate reconciliation.

Reliance Jio Infocomm, the telecom unit of Mukesh Ambani-led Reliance Industries, signed the agreement with Reliance Communications, the flagship firm of the Anil Ambani group, to share their fibre-optic communications networks.

The long rumoured pact is the “first in an intended comprehensive framework of business co-operation” between Reliance Jio and RCom, to use each other’s infrastructure across Indian cities, the companies said.

This will provide “optimal utilisation of existing and future infrastructure of both companies on a reciprocal basis,” they added in separate but identical statements.

There have been increasing signs of a warming of ties between the brothers since their fight for control of Reliance erupted after their rags-to-riches father, Dhirubhai, died in 2002 without leaving a will.

“It is a positive sign that the brothers are keen to work together,” said a fund manager with a state-run brokerage firm, who asked to remain unnamed.

The pair ended up splitting the Reliance group left by their father that was India’s most valuable listed company.

After a protracted court case that saw their mother, Kokilaben, act as peacemaker, the brothers agreed to bury the hatchet and tear up a non-competition agreement that prevented them from entering the same sectors.

In 2011, Mukesh and Anil came together to dedicate a memorial to their father, and their mother declared the enmity over, telling reporters: “There is love between the brothers.”

RCom is the most leveraged among Indian cellular carriers with net debt of nearly $7bn, or more than five times its annualised operating profit. The company has been looking to sell assets to cut its debt load but has fallen short in several attempts.

“It is definitely a relief for Reliance Communications, and a relief coming to the group after a long, long time even though not sufficiently large,” said Jagannadham Thunuguntla, strategist at SMC Global Securities in New Delhi.

The deal will help Reliance Jio “reach the market faster,” said Deven Choksey, managing director of K R Choksey Securities in Mumbai.

Yesterday’s agreement, while small in value, was the first tangible evidence of an end to the business rift between Mukesh, India’s wealthiest man, and his younger sibling Anil.

News of the agreement heightened speculation among analysts about further collaboration between the brothers as well as about a possible merger of the two Reliance telecom companies.