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Last updated: September 25, 2012 8:53 pm
Billionaire industrialist Mukesh Ambani’s Reliance Industries is preparing to bid in India’s forthcoming mobile auctions.
His move could have potentially far-reaching consequences for the country’s battered $32bn telecoms market and his troubled relationship with his brother Anil, according to people familiar with the group.
The move reflects the determination of the elder Mr Ambani to re-enter a sector he left reluctantly in 2005, after a long-running feud in which his younger sibling took control of their family’s telecoms assets in the break-up of the Reliance conglomerate.
Speculation about an intensification of the rivalry between the brothers has been rife since the 2010 expiry of a non-competition pact.
The agreement, brokered by their mother to end their feuding, forbade either from entering sectors in which the other operated.
India’s Supreme Court threw the telecoms industry into turmoil this year by cancelling 122 second generation mobile licences, which allow basic voice and text services, citing improper allocations. Those licences are scheduled to be re-auctioned in November.
Any entry into the forthcoming auctions would intensify competition in a cut-throat sector and set India’s richest man on a long-term collision course with the country’s two leading mobile operators, Bharti Airtel and Vodafone.
“Strategically it makes a lot of sense,” said Rashesh Shah, head of Edelweiss, a Mumbai-based broker. “Given the huge upheaval in the industry it also might be quite a good time to get in.”
Mr Ambani’s company is already planning a fourth- generation mobile service, offering superfast data services to businesses and wealthy consumers.
His move to re-enter the telecoms market has invited speculation about a possible tie-up with Reliance Communications, his younger brother’s telecoms group, potentially involving sharing infrastructure, or even a possible takeover. Both companies declined to comment.
Close observers of the elder Mr Ambani say his plan to take part in the auction carries wider significance, with roots in the break-up of the business empire his father Dhirubhai Ambani built from scratch to become India’s largest listed company.
“Telecoms has always been Mukesh’s baby – it was tough for him to give it up,” said one senior Indian business figure, speaking on condition of anonymity. “And if they get in they will want to be the dominant player . . . In the long term they don’t get into businesses where they don’t dominate.”
Those familiar with Mr Ambani’s thinking say his auction preparations are part of plans to augment his 4G proposals with a more traditional “voice” product, a strategy analysts say is more likely to succeed than a data-only offering.
“Reliance will make a big bang entry when they come out with 4G,” says one senior telecoms analyst, speaking on condition of anonymity. “If they enter the auctions it will sound very clear warning bells to their competitors that change is afoot, because the landscape becomes much, much more competitive in the long-term.”
Mr Ambani’s plans will also rekindle his rivalry with another of India’s most successful billionaire tycoons, Sunil Mittal of Bharti Airtel, the nation’s largest mobile operator by revenue.
The two fought a bitter telecoms battle in the early 2000s. Bharti launched a 4G service in Calcutta this year, while UK-based Vodafone are also likely to launch such a service, potentially pitting both against Mr Ambani.
Reliance attended a private “pre-bid” conference for the auctions earlier this month, while a report from Credit Suisse suggesting the Mumbai-based group would enter the auctions also dented rival’s share prices in late August.
Industry analysts caution that Reliance’s participation remains dependent on as-yet unpublished rules governing the auction.
The group could also move forward in partnership with, or by buying out, other operators, although analysts at Credit Suisse said they believed Mr Ambani would prefer to participate in the auction.
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