STRATEGIC FAILURE OF

RELIANCE COMMUNICATION
Failure of Reliance – Aircel Merger Section C
Aashish Solanky – ABM19008
Chandni Goyal - PGP38066
Jayanthanan Abaian - PGP38129
Nazish Islam - PGP38080
Ruby - PGP38360
Ruchi - PGP38092
Shivam Rawat - PGP38149
Shubham Oraon - PGP38097
Twisha Singh - PGP38159

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Index
Impact on company reputation & market
01 Introduction - Reliance
08 standing

Reliance-Aircel
02 merger background 09 Steps taken to address root cause

Reasons for Failure of

03 the merger 10 New policy implementation

04 Impact of merger failure

11 Positive Outcomes and opportunities

05 Role of Leadership 12 What actually happened

06 Company response
13 Key learnings

07 Internal and External Obstacles

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Reliance Communications

Founded by Anil Ambani in

2004 Declared Bankruptcy in 2019

Prominent player in the 2G $7.7 Bn debt against $ 2.8 Bn

and 3G era worth of assets

Vision
To build a global enterprise for all our Currently operates via
stakeholders, A great future for our Global Cloud Xchange
countries

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 Rcom-Aircel Merger

THE MERGER AIMED TO

RELIANCE COMMUNICATION THE MERGER WAS
CREATE A STRONG ENTITY
AND AIRCEL PLANNED TO EVENTUALLY CALLED OFF
IN INDUSTRY AND COMPETE
MERGER IN 2016 AND DID NOT MATERIALIZE
WITH LIKES OF JIO AND
AIRTEL

RCOM CAME UP WITH AN

BOTH RCOM AND AIRCEL BOTH OF THESE ALTERNATE PLAN TO
WERE DEBT LADEN AND COMPANIES WOULD HAVE FULFILL ITS DEBT
FACED SEVERAL BENEFITED FROM OBLIGATION AND
REGULATORY HURDLES SYNERGIES EVENTUALLY FILLED FOR
BANKRUPTCY

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Reasons for Failure of Merger of Firms

1 2 3 4
Excess Incorrect Lack of
Competition Motive Innovation Regulatory issues
Both companies were focused
While there was a lot to be on increasing market share and The approval for the merger was
•Market was filled with several
gained from this merger, the not on innovations which would pending. Also, certain stakeholders
competitors
•Players like Jio, Airtel primary motive was leveraging provide them with long term were unhappy with the merger and
dominate the market combined size of firm to advantage. Thus, in the long filed litigations to the courts
•Low predatory pricing in the
restructure debt term the merger was bound to
market
fail

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Impact of Reliance – Aircel Merger Failure

Impact on Reliance communication Impact on Customers

• Financial stability of both the companies worsened. Rcom had to restructure

its debt plans to ensure that its debt obligations were fulfilled.
• Due to the prevailing market conditions Rcom could not compete with the
likes of Jio, Airtel.
• User count declined with increasing requests from customers to switch
service providers.
• The market conditions along with the crippling debt of approximately USD 7
billion caused the company to file for bankruptcy in 2019.
• There was an increase in customer dissatisfaction as the service provided by
the company worsened due to internal chaos
• There was loss of attractive pricing and benefits that was previously being
provided by Rcom.
• The quality and coverage level of the service worsened as the company lost
its assets to fulfill its debt obligations

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Role of Leadership

Transparent Communication with

Adoption of Dynamic Strategies
The leadership announced their intent to reduce
debt. The initiated exploration and quickly
adopted several means to reduce debt
Shareholders
The leadership was crucial in preserving an
atmosphere of open and honest communication with
stakeholders.

Commitment to Address Legal Challenge Promoting Financial Stability and Debt

The leadership responded by stating its desire to Reduction
contest the legal issues resulting from the failed The leadership showed its commitment to enhancing
merger, exhibiting a readiness to face off against the company's financial condition by disclosing
legal challenges. alternate options for debt reduction.

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Company Response (1/2)

Official Statement by Reliance Communication

“Merger agreements with Aircel allowed to lapse by mutual consent,” said the
statement released by the Anil Ambani company. “Inordinate delays caused by legal
and regulatory uncertainties, various interventions by vested interests, policy directives
impacting bank financing for telecom and changed industry dynamics,” said the
company’s statement.

Source: RCom calls off Aircel merger; blames legal uncertainties, policy directives for delay, Article from The Indian Express

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Company Response (2/2)

Communication with
Measures Taken
Stakeholders

• Releasing a statement to news outlets to • Highlighted the uncertainties caused by legal

address the rumors and reduce confusion about and regulatory challenges and interventions
the failure from vested interests
• Shared its alternative plans for debt reduction, • RCom assured its shareholders and lenders
RCom aimed to instill confidence in its that it would continue to adhere to the
financial stability standstill period until December 2018,
expecting to complete the strategic debt
restructuring (SDR) process as per applicable
guidelines

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Internal & External Obstacles Encountered
Company’s failure to attract buyers for non-core
assets: The company could not find any buyers foe sale
of its assets to clear dues of creditors. It was a major
hindrance in the resolution process.
Difficulty in Selling Spectrum: The license of the
company expired which made it difficult for company
to sell the spectrum.
Sale of Towers & Underground Fiber in Limbo: The
towers that company wanted to sell were continuously
depreciating and needed repair before use.
Insolvency Filing: Due to the company's inability to
sell its assets to pay back creditors, it filed for voluntary
insolvency which will require at least 22% external
shareholder's voting.
Ericsson's Dues: Ericsson filed regulatory proceedings
against company due to non-payment of its dues which
was directed by the court.
Department of Telecommunication Pending
Payment: The company didn't pay some pending
security payments to DoT upon which DoT stopped its
sale of spectrum stating the spectrum to be a national
property.
Impact on Reputation & Market Standing

The company was reeling under Rs 46k crores of debt. The company’s inability to pay its dues within the
timelines given by the court and the initiation of multiple legal proceedings against it further damaged its
image.

The share price of the company also tumbled over 48% after company decided to file for insolvency after its
failure to sell its assets for repayment of dues. The shares of other companies under the group also witnessed
heavy selling.
Steps taken to address root cause

Debt Restructuring: The corporation restructured debt Asset Monetization: To minimize debt, RCom sold or
with creditors to lengthen repayment periods, cut leased its telecom towers, fiber optic network, or other
interest rates, or even wipe off some of the debt. infrastructure assets.

Cost Optimization and Efficiency Measures: RCom Strategic Partnerships or Mergers: RCom considered
reduced operating expenditures, staff, and operations to strategic partnerships or mergers with other telecom
enhance financial health. carriers to increase resources, customers, and market
competitiveness.

Customer Retention and Loyalty Programme: RCom Industry Differentiation: To stand out in the
offered loyalty programme, special incentives, and competitive telecom industry, RCom started
better customer service to retain consumers. differentiating its offers.

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New policy implementations

Focus on Talent and HR: Talent management and HR Communication and Stakeholder Management:
team of Rcom started working with employee centricity There was even more emphasis on open communication
between stakeholders.

Investment in Tech & Innovation: Reliance Client-Centric Approach: Focusing on client demands
communication started focusing more on innovation in and offering exceptional customer service help
order to gain sustainable competitive advantage in the increased customer loyalty.
market

Improved Corporate Governance: Companies Compliance and Legal Affairs: Company started
improved their corporate governance laws to ensure the ensuring that they met all the regulatory requirements in
accountability of managements and other stakeholders order to avoid similar situation in the foreseeable future

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Positive Outcomes & Opportunities
After the merger's failure Reliance Telecom retained
full control over its operations and strategic direction
The company had greater financial flexibility to invest
in key initiatives and reduce existing debt levels.
The failure helped explore alternative partnerships or
collaborations with other operators.
Reliance Telecommunications could now redirect its
focus and resources to strengthen its core business areas
and explore growth opportunities in its existing
markets.
The company could analyse the reasons behind the
failure, identify areas for improvement, and use these
insights to approach future mergers or strategic
partnerships more effectively.
The company could take a fresh look at its market
positioning, growth targets, and areas for innovation
and investment.
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What actually happened

After reassessing all options, RCom went ahead with monetizing the tower and fibre assets and real estate
along with focus on optimization of the spectrum, specifically 4G technology. This presented them with a
prospect of generating funds of over
Rs. 25K crore which helped in debt reduction. A renewed focus on contingency plans also helped with Rcom’s
strategic transformation.

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Key Learnings
01
Thorough due diligence is crucial in any
merger and acquisition.
02
Understanding the market dynamics and
competitive landscape is essential.
03
Awareness regarding regulatory environment
and potential hurdles during merger process.
A clear roadmap for combining operations,
04
technology and human resources to achieve
synergies and efficiencies in crucial.
05
Analysing financial health and debt position
of target company is essential.
06
Cultural fit between merging entities is
important for smooth integration.
Mergers are unpredictable, so having
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contingency plans for various scenarios is
important.
Understanding industry trends and learning
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from past merger experiences within the
sector within the sector can offer valuable
insights.
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Thank You

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