Why Mukesh Ambani Wants to Enter Telecom Industry so Badly?

Last Updated: 2 September, 2016
Why Mukesh Ambani Wants to Enter Telecom Industry so Badly

The word Reliance is all about Dhirubhai Ambani, the powerful business tycoon who built the Reliance Empire from nothing. However, his elder son, Mukesh Ambani, the chairman and managing director of Reliance Industries Limited is always persuaded in business. Mukesh’s telecom ambition isn’t just started now; it has its roots deep in the early 2000’s.  It isn’t just a business; it was his father’s ambition of making voice calls cheaper that would be affordable to all Indians.

Mobile Revolution in India

Mukesh Ambani revolutionized the Indian mobile industry starting Reliance Infocomm as promised to his father. He used aggressive business strategies with lucrative offers and plans.

Now mobile becomes the most used commodity across the country. It has penetrated to all the places in India even the areas where electricity still not available. Everyone has access to mobile phones which was once exclusive to riches. At that time, network company’s charges for all type of calls, even you have to pay for incoming calls.

It was him who introduced cheap mobiles with free incoming calls and affordable call rates. That forced every telecom incumbents and mobile companies to reduce their call rates and mobile prices, respectively.

The Split

After Dhirubhai Ambani’s death in 2002, there was a feud between his two sons Mukesh Ambani and Anil Ambani over the ownership of Reliance. It went on for three years which was then settled after Dhirubhai’s wife intervention and the business was parted in 2005.

According to the deal, Mukesh took over Reliance Industries and Indian Petrochemicals Corporation Limited (IPCL) while Anil Ambani received telecom, power, entertainment and financial services. Mukesh had lost its father’s dream to his younger brother.

This is where everything started that made Mukesh Ambani the richest person in India while Anil lags behind him in all aspect.

Non-Compete Clause Agreement

Mukesh is an aggressive business tycoon ever. In order to prevent him starting a new telecom company or competing with business that Anil holds, he had to sign a non-compete clause in the agreement. According to agreement, both the bothers should not start any business competing each other.

After the agreement was scrapped or expired in 2010, Mukesh Ambani begins his venture in telecom industry which was always his favorite one. He bought 96% stake in Infotel Broadband which was the only company that secured 4G spectrum bands for all the 22 telecom circles. Whereas other pioneer companies like Bharathi Aitel, Idea, Vodafone have secured bands for certain telecom circles in the country.

Evolution of Reliance Jio

Mukesh renamed the company as Reliance Jio Infocomm Limited and started building fiber optic network across the country. Reliance Jio is the only conceived IP-based telecom network in India.

Meanwhile other telecom incumbents were in pressure about Reliance Jio as what business model would Jio implement to attract customers. Nobody would ever forget the man, who created a mobile revolution in India, owing his father’s dream.

Mukesh had invested over Rs 150,000 crore into this project. In the last couple of years, JIO has already spent almost as much as the major incumbent telecom firms, like Bharti Airtel Ltd, Idea Cellular Ltd and Vodafone India Ltd, have spent over the past more than 20 years of being in operations.

Wrapping Up

Why Mukesh Ambani wants to enter Telecom industry so badly? In early 2000’s, when Reliance Communication emerged, the brain behind the company is Mukesh. With his experience with telecom sector, he knows that existing telecom operators are not providing a better service to people and that he can easily compete with them.

Other telecom incumbents survived till then because they didn’t have a huge competitor in the industry, as they are a good family having similar business models and plans. Now, we have Reliance Jio in the ground, and the rest is history.

You May Also Be Interested In:

How Reliance Jio can Offer Free Voice Calls While Other Networks Command Hefty Amount : Case Study