The Rise and Fall of RCom

By Wardah Khan|Senior Correspondent|October 15, 2018|

The journey traversed by one of the biggest conglomerates of telecom industry- Reliance Communications (RCom) has been obstacle-clad in the past few years. Anil Ambani- the junior Ambani biz scion who was once revered for bringing mobile telephony to masses of India with its customer base expanding to almost around 100 million customers worldwide, is now struggling to cope up with thousands of crores of debt stacking up and mounting technological costs of his crumbling venture.

The Glorious Years

Despite being a late entrant in the telecom sector when all other companies had forayed into this avenue post the liberalisation measures, Reliance Communications Limited (RCL) stormed the market with its CDMA-based mobile services across the country. The years between 2004-2006 was a boom for Reliance Communications as it had an enthralling presence in around 22 telecom circles. These services ranged from mobile handsets, wire-line services, broadband connections to national- international long distance services, global voice and data facilities. In the first half of 2007, RCL was India’s second biggest telecom service provider with 32.4 million mobile subscribers of both CDMA as well as GSM based technologies.


What Went Wrong?

RCom’s primary business was mainly backed by CDMA technology in extending quality based voice call services but it lacked in data providing services which was a great setback on its part when the telecom sector was gearing up for a 4G model. Flexibility issues in advancement towards better GSM and LTE technology resulted in RCom losing out its subscribers to rival companies. Apart from this CDMA issue, the Monsoon Hungama initiative costed dearly to this telecom giant. This initiative was supposed to offer cheap handsets and free voice calls (much like the Jio proposition). Though it diversified mobile usage in the country, it consequently left Reliance Communications whimpering under a debt trap, whereby it wrote off a whopping INR 45 billion ($693 million) in 2006. To add to the woes of RCL, came the 2G spectrum scam of 2008. It was alleged that several telecom companies had been allotted spectrum at below the market rates. Consequently, the then Telecom Minister, his secretary and several companies were sacked by CBI after the scam was unravelled. RCL was also named as one of the prime accused and beneficiary of this infamous event with the Managing Director and two senior executives of it being arrested on grounds of corruption charges against them. The SC fined all the telecom giants who had been wrongfully allotted the under-priced frequency allocation licenses and quashed their licenses.

Such grave charges coupled with falling share prices of the Company, weak performance of its global network operations unit severely affected its standing in the telecom market. In a last ditch effort, it planned to merge with rival Aircel in 2017 to face the Jio crusade but the tie up couldn’t materialise due to regulatory issues.


The Contemporary Times  

How does Anil Ambani plan to collect and integrate the relics of his broken empire, amidst impending loans and negligible market presence, is a question clamouring in several inquisitive minds.