RIL to acquire the telecom arm of younger Ambani, RCom

Rumour: RIL to acquire Rcom
Mukesh Ambani led Reliance Industry is rumored to acquire the Reliance Telecom business of his younger brother in order to become the national player.

Mukesh Ambani is back in telecom with buying up Infotel Broadband, which bid the most in the broadband wireless access (BWA) spectrum auctions and secured 20 MHz of spectrum in every single one of India's 22 telecom circle. With the Infotel acquisition, RIL is limited to wireless services only and need to acquire one of the existing telecom players.

RIL and ADAG companies have announced last year that they were ending a set of non-compete agreements that had fuelled discord between them. But under the reworked agreement, which modifies an earlier family settlement of 2005, seeks to ensure that if the wings of the undivided Reliance compete in a sector, only one can use that name, thus forbidding RIL from using the name Reliance for getting into financial services, insurance, entertainment and telecom business.

With the ever increasing competition and regulatory norms, the best option for the RIL foray in telecom sector is to acquire RCom business.

View: This rumour has gripped the matket ever since some brokerage house and leading newspaper put up a question if the two borthers will come together in the telecom space. 

Its a known fact that Reliance Communication is having trouble because of operational loss and its involvement in the 2G scam. And the big brother, Mukesh Ambani, is cash rich with RIL. It also has a pan-india 4G liscence. This could have led some analyst to believe that there is acquisition on the horizon. 

Well we do not subscribe to that argument. Considering that the RIL is cash rich, we definitely expect the company to buy out some company. Though chances of it being of Rcom is less. Based on the business sense that RIL has kept so far, there is far more chance that the buy out will happen either when the telecom industry enters the consolidation phase or only if it gets any company at a cheap price, be it RCom, Aircel, Uninor etc. 

OneIndia Money with inputs from Religare

Read more about: reliance, ril, bse, nse, telecom, oil and gas
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