Which Ambani has won?

Rex Mathew
20 June 2005

The markets seem to give a slight edge to the Anil Dhirubhai Ambani Enterprise.

After months of wrangling, and Mukesh and Anil Ambani have arrived at an arrangement to split the business house their father Dhirubhai built. Which brother has benefited more from the so-called settlement?

Assuming that there will be an asset division on the same lines as the division of responsibilities, most analysts reckon that Anil Ambani has benefited more as the businesses he has been allocated have far higher growth prospects and, therefore, would enjoy better stock market valuations.

Airtel is better
Anil gets the second largest private mobile telecom company in the country after Bharti TeleVentures, a sector which still has a lot of room to grow and will be dominated by the larger players. If one were to add the over one million GSM subscribers of Reliance in the eastern parts of the country and another million-and-half subscribers of fixed and fixed wireless services, the total subscribers of Reliance Infocomm almost matches Bharti's.

However, as a business Reliance Infocomm pales in comparison with Bharti. Its services under the Airtel brand enjoy a much better brand image than Reliance Infocomm. Average revenues per subscriber of Reliance are much lower than Bharti's and so is the quality of service. Going by current performance, Reliance would take quite some time to match Bharti in net cash inflows. Reliance's global under sea telecom cable network, Flag Telecom, is yet to generate significant cash flows.

Bharti's market value is close to Rs43,000 crore. Assuming that Bharti is fully valued at present and considering all the factors above, Reliance Infocomm could fetch a ballpark valuation of between Rs25,000 to Rs30,000 crore. It is difficult to arrive at a more precise valuation as nothing much is known about the financials, apart from total revenues and profits.