India's richest man bails out brother fueling record rally in Reliance Communications

[MUMBAI] Shares of Anil Ambani's struggling wireless carrier extended this month's heady run-up after his billionaire brother Mukesh agreed to buy the company's spectrum, mobile-phone towers and fiber assets, providing a cash infusion that will be used to help stave off insolvency.

The stock surged 21 per cent to 37.4 rupees at 10am in Mumbai, having more than doubled in the past week alone amid speculation that Ambani had secured agreements to sell enough assets to cut debt. Trading volume was seven times the 20-day mean for this time of day.

Mukesh's own wireless venture, Reliance Jio, emerged the highest bidder for the assets and the sale is expected be closed by March, Reliance Communications Ltd said in a filing on Thursday, which also marked the group founder Dhirubhai Ambani's birthday. The companies didn't disclose a value for the transaction.

RCom said earlier this week it expects to fetch about 250 billion rupees (S$5.23 billion), all of which would be used pay down loans. The carrier had total debt of 450 billion rupees as of October-end, and it aims to pare that to 60 billion rupees, Ambani told reporters on Tuesday.

The bailout is the latest twist in the years long saga of the Ambani brothers which has seen them split the empire their father founded. The brothers, who split in 2005, agreed to a rapprochement after a nudge from the Supreme Court couple of years later when they sought its intervention in a deal for supplies of natural gas.

Subsequently, they called a truce and became competitors in the telecommunications business after Mukesh made a splashy entrance last year. It was then that RCom agreed to share its spectrum, networks and towers with Reliance Jio, in a move that Anil referred as a "virtual merger" with Jio.

RCom posted its first annual loss after Jio stormed into the market by offering free calls and data. That escalated a price war that's forced consolidation in the sector. Creditors including China Development Bank and the Indian unit of network-equipment maker Ericsson AB have sued RCom, seeking to compel repayment by RCom.

Earlier this month, a public-relations firm became the latest to ask an Indian tribunal to place RCom under insolvency proceedings after it failed to pay dues.

BLOOMBERG