JIO-A BRAND THAT
CONNECTED MILLIONS
& DOWNFALL OF
RELIANCE
COMMUNICATIONS
Abstract
The success story and failure story of Reliance Jio and Reliance communications was analyzed
with macro and micro elements
Submitted by:
Anmol Rathi – 18CHE165
Harshali Shardul – 18CHE155
Jayesh Saraogi – 18CHE158
Nagashravan Hemadri – 18CHE170
Meenal Rawlani – 18CHE175
Submitted on:
3-09-2021
Table of Contents
Jio-a brand that connected
1 What is Jio and How did it come into being? ..................................................................... 2
2 Overview of the Telecom Industry ..................................................................................... 4
3 What did Reliance Jio do Differently? ............................................................................... 5
4 Impact of Jio on its Competitors......................................................................................... 6
5 Target Audience of Reliance Jio ........................................................................................ 8
6 Political factors that helped Jio gain momentum.............................................................. 10
6.1 Social Media Campaigns ........................................................................................... 10
7 Conclusion ........................................................................................................................ 11
Downfall of Reliance Communication ................................................................................. 12
1 Introduction ...................................................................................................................... 12
2 History .............................................................................................................................. 13
3 Rise & fall of Reliance Telecommunications ................................................................... 14
3.1 The beginning ............................................................................................................ 14
3.2 Non compete waived, allowing Jio to enter .............................................................. 14
3.3 Merger falls apart and voice servcices discontinued ................................................. 15
3.4 The present scenario .................................................................................................. 15
4 Reasons for Downfall ....................................................................................................... 16
4.1 Being Stubborn with the old tech .............................................................................. 16
4.2 Involvement in 2G Scam ........................................................................................... 17
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Success story- Reliance Jio
1 What is Jio and How did it come into being?
Reliance Jio Infocomm limited, popularly known as Reliance Jio, is associated with the
wireless telecommunication industry and deals in mobile- telephonic communications,
broadband services and digital service.
In 2005, Reliance Industries Limited split and there was one major demerger of note for
Mukesh Ambani. His dream project- Reliance Infocomm became a part of Anil Dhirubhai
Ambani Group. Mukesh Ambani went on to acquire Infotel Broadband Services Limited. The
company was the only successful bidder for pan-India 4G network. Reliance then worked on
establishing a base for high-speed optical fibre 4G network, which is now actually capable of
much more than 4G.
Then slowly and steadily, Lyf phones made foray into the market with Jio preview offers.
Free unlimited data for 3 months and free voice calls and sms was the way they entered the
market. Lyf phones seemed a decent deal, but it was the Jio sim that caught people’s eyes.
The Reliance Company commercially launched its services on 5 September 2016. Jio
th
crossed 100 million subscribers at the end of February 2017. This is the fastest ramp-up by
any mobile network operator anywhere in the world. Jio owns spectrum in 800 MHz and
1,800 MHz bands in 10 and 6 circles, respectively, of the total 22 circles in the country, and
also owns pan-India licensed 2,300 MHz spectrum.
The company has a network of more than 250,000 km of fiber optic cables in the country,
over which it is partnering with local cable operators to get broader connectivity for its
broadband services. With its multi-service operator (MSO) licence, Jio offers not only 4G
broadband services but also provides data, network, instant messaging, live TV, movies on
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demand, news, streaming music, digital payments platform and free Wi-Fi hotspot services
etc.
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2 Overview of the Telecom Industry
In the present scenario, the competition among businesses operating in the telecom industry
of India has become very intense, and now it has become very complicated for companies to
sustain in the marketplace. Currently, India has been recognized as the second largest and the
most potential communication sector in the world. It can be expressed that a substantial
number of the subscriber base of 1.19 Billion is the critical factor which has contributed to
such rapid growth and development of the Indian Telecommunication industry. Over the past
decade, the nation has witnessed drastic changes and growth in the telecom sector and at the
same time, the telecom sector has contributed a lot to the overall development of India’s
GDP.
Apart from this, strong demand from customers is also a critical factor which is contributing
to long-term growth and sustainability of the telecommunication industry of India. At present,
the customers in the industry are looking forward to service providers which can offer high-
speed internet and effective connectivity at prices which are satisfactory and convenient.
However, it can be argued that apart from customer demand, the liberal and reformist policies
and regulations of the Indian government is also a critical factor which has supported the
telecom industry to carry out the smooth flow of all operations and activities in the long-run.
The businesses in the industry are getting adequate support, assistance from the government
and this has further provided them with an opportunity to attain the desired volume of sales
and profitability.
Currently, the Indian Telecom industry is also contributing to economic development of the
country by creating adequate and compelling opportunities for employment.
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3 What did Reliance Jio do Differently?
Reliance realised that in the 21st-century, mobile data is going to be the new oxygen. Every
telecom company kept competing over voice call services and developed technologies to
provide the cheapest call rates to its customers. Companies were earning 60-70% of their
revenue from voice calls and because of this price war, it became a saturated market. No one
was focusing on data services, for which everyone was charging a high price, which was yet
to be explored and grown.
Reliance understood that the room for growth was in the data services not in voice calls.
Hence, they brought in growth hacking technology and invested 2.5 lakh crores in it which
was 3 times more than the total investment of Airtel, Vodafone, and Idea.
They created the 8000-kilometer optical fiber cable network which was part of existing fiber
optic cabling from Europe to South Asia to Malaysia and to Singapore. This would give Jio a
speed of 40 Tb/second which was 10 times more than Airtel speed i.e. 4 Tb/second.
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4 Impact of Jio on its Competitors
With the entry of Reliance Jio to the telecom market, existing market players in the Indian
telecom industry like Airtel, Vodafone, Idea and BSNL started losing their customers.
In the modern era, the only and most convenient way to sustain in the highly competitive
marketplace is to retain customers in every possible manner. Customer retention is significant
for almost every business operating in any industry as it supports in carrying out the smooth
flow of all operations and activities.
However, it can be critically argued that customer retention is not an easy task for companies
because they are required to offer innovative and high-quality services at competitive prices
to attain the same. Considering the case of mobile network providers such as Airtel,
Vodafone, Idea and BSNL, these brands failed to retain the customer because the services
were not innovative and at the same time the pricing strategy employed by these brands could
not compete with Jio.
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The impact of Jio on the market as mentioned earlier players can be understood by the fact
that Jio has not only attracted the existing customers of these players but now the new
customers are also going towards Jio. It means that the brands such Airtel, Vodafone, Idea
and BSNL are now struggling not only in retaining their existing customers but these
businesses are also facing issues in attracting new customers. Declining sales, profitability
and market share is also a critical impact which Airtel, Vodafone, Idea, BSNL and other
players in the market had because of the entry of Jio.
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5 Target Audience of Reliance Jio
Reliance Jio paid interest in providing the best and cheapest Internet data services, so their
target audience became the one’s having SmartPhone, looking for high-speed internet
connection. Not only this they also created a demand for 4G enabled smartphones as their
services could only be availed using that.
Not only is Jio targeting people using smartphones but also the industries which require the
use of digital technology. Bridging the gap between customer merchants and the final
consumer.
Jio’s plan is uniquely devised to capture any industry which requires the use of technology.
Some specific industries include Education, Healthcare, Media and many more.
Business strategy of Reliance Jio: Biggest Contributor Towards Their Success
Jio used the “AARRR strategy” to penetrate the market. They used 5 key components that
helped the business acquire and retain customers creatively and cost-effectively.
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Acquisition – After the commercial rollout of Jio in September 2016, Jio offered free
services to its customers for 3 months. This plan worked as the trump card for Jio to acquire
the customers. Within one month, Jio was able to acquire 16 million subscribers.
Activation – The users were provided with the best experience, which was never provided by
any telecom service provider. The unlimited high-speed, 4G data with unlimited calling was
unimaginable to the customers.
Retention – Jio didn’t stop here. On the occasion of the new year in 2017, they extended the
free services to the users for another 3 months. Jio became the first-ever telecom company to
provide 6 months of free service to customers. In just two and a half years into the business,
Jio gained more than 300 million active subscribers. It took more than 19 years for its
competitor, Bharti Airtel to reach such a number. Such was the power of Jio.
Referral – The customers became its preacher. Jio got more and more business through
positive customer reviews and user experience. This added as a boon to its tremendous
growth.
Revenue – Slashing the prices to 1/10th the existing cost, Jio got ahead with revenue, which
was the major factor in getting such a leap in the market.
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6 Political factors that helped Jio gain momentum
Mukesh Ambani has become doubly richer within the first four years under the Modi
government. Between 2014 and 2019, his wealth more than doubled –from about $23 billion
to $55 billion. This means that Mukesh Ambani accumulated more wealth in the five years of
BJP rule than all the wealth he made and inherited in the entire 58 years of his life before
Modi became Prime Minister. This has to concede that without BJP Government policies,
this gain would be fewer.
The schemes made by the Government made it easier for billionaires to add more billions.
Initially when Jio was launched in newspaper advertisements, the person endorsing it was
none other than Prime Minister Narendra Modi. He appeared on the advertisements wearing a
dress that was colour coordinated to match with the Jio logo. People who strongly believe in
the ideologies of politicians are moved by this attempt. Some even misunderstood it as a
scheme by the Modi Government. There are several similar cases which can support this.
Hence, the Government and political factors have had a strong hand in uplifting Jio.
6.1 Social Media Campaigns
Reliance has been the centre of attention for the last few years due to its innovative ad
campaigns. These campaigns ran across all mass mediums and swayed our interests to Jio’s
meteoric rise and cut-throat prices.
A few breathtakingly innovative examples of the same are as follows:
[Link] Digital India, Home Delivered
Reliance Jio came up with an interesting campaign of providing SIM Cards home-delivered
to the customers. Customers didn’t have to take the pain to visit a physical store to get their
SIM Card. With this campaign, Jio reached more than 26 million prospective customers in
just 20 weeks.
[Link] Jio Cricket Play-Along
In India, cricket is one of the most popular games. Jio understands the depth of the fans
invested in sponsoring teams in the Indian Premier League. Knowing the interest and craze
for cricket, Jio devises a way to engage all the cricket lovers to answer the outcome of each
ball played in the live cricket match and win prizes every day.
These are the strategies that Jio implements to create and establish a strong presence in the
minds of customers which results in consumers developing a sense of trust element in the
company.
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7 Conclusion
Reliance Jio has a strong presence in the telecom market and shows no sign of bowing down
to its competition any time soon. The expansion and the growth marketing strategy enabled
Jio to gain such dominance. Furthermore, Jio’s entry into various newer projects such as Jio
Fiber, Jio Postpaid, has led to a diversified and stronger control over the market share.
Overall, Reliance Jio has made the greatest impact on bringing about the digital revolution in
India.
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Downfall of Reliance Communication
1 Introduction
Reliance Communications Limited is the flagship Company of Reliance Anil Dhirubhai
Ambani Group India's third largest business house with around 1.2 billion subscribers.
RCOM together with its subsidiary Global Cloud Xchange Limited (GCX) is a leading global
communications services provider with businesses including a vast global subsea network; a
global on-net Cloud ecosystem; extensive India and global enterprise business; India Data
Center Business (IDC) and India National Long Distance (NLD) business.
The company owns through their subsidiaries a global submarine cable network
infrastructure and offers managed services managed Ethernet and application delivery
[Link] company is India's first telecom service provider offering nationwide CDMA
and GSM mobile services with digital voice clarity. Their mobile portal R World offers the
widest range of mobile content spanning e-commerce m-commerce entertainment music
news astrology cricket bollywood maps search one-click set-up access to email and social
[Link] company offers the most comprehensive portfolio of enterprise voice data
video internet and IT infrastructure services catering to large medium and small enterprises
for their communications networking and IT infrastructure needs. Their product portfolio
includes national and international private leased circuits broadband internet access audio
solutions including Centrex toll free services voice VPN video conferencing MPLS-VPN
remote access VPN Global MPLS VPN managed internet data centre (IDC) services to name
a [Link] company operates nationwide Direct-to-Home satellite TV services under its
wholly owned subsidiary Reliance Big TV Limited (Big TV). They formed an alliance with
Polycom Inc. the global leader in tele-presence video and voice solutions to introduce world's
first wireless high-resolution video and CD-quality audio conferencing service along with
simple-to-use content sharing capabilities - at a bandwidth speed of 256 kbps at any place.
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2 History
Reliance Communications Ltd was incorporated on July 15 2004 as a private limited
company with the name of Reliance Infrastructure Developers Pvt Ltd. In July 25, 2005 the
company was converted into public limited company and the name was changed to Reliance
Infrastructure Developers Ltd. During the year the company altered the objects clause of the
memorandum of association to carry on the business of telecommunication infrastructure
telecommunication system telecommunication network and telecommunication services.
In August 3 2005 they further changed their name to Reliance Communication Ventures Ltd.
In August 11 2005 the equity shares of the company were acquired by Reliance Industries
Ltd and thus the company became the wholly owned subsidiary of Reliance Industries Ltd.
As per the scheme of arrangement all the properties investments assets and liabilities related
to Telecommunication Undertaking of Reliance Industries Ltd was transferred and vested in
the company on a going concern basis with effect from December 21 2005.
In March 6 2006 the equity shares of the company were listed on the Bombay Stock
Exchange Ltd and the National Stock Exchange of India Ltd. In June 7 2006 the name of the
company was changed from Reliance Communication Ventures Ltd to Reliance
Communications Ltd. As a result of a Scheme of arrangement with Reliance Industries
Limited the company became the holding company of minority interests in the
telecommunications companies formerly controlled by Reliance Industries Ltd. The company
restructured the telecom businesses by realigning the economic ownership of various
businesses into the company.
During the year 2008-09 the company launched GSM services in 14 service areas and
commenced commercial operations. They received start-up spectrum to launch GSM services
from Department of Telecommunications (DoT) under their existing Unified Access Service
License (UASL) in 14 service areas.
During the year 2010-11 the company along with its wholly owned subsidiary Reliance
Telecom Ltd (RTL) was awarded 3G spectrum in 13 out of 22 telecom circles. In December
13 2010 the company became the first operator to offer 3G services to customers in top 3
metro circles namely Mumbai Delhi and Kolkata.
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3 Rise & fall of Reliance Telecommunications
3.1 The beginning
3.2 Non compete waived, allowing Jio to enter
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3.3 Merger falls apart and voice servcices discontinued
3.4 The present scenario
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4 Reasons for Downfall
There are a number of reasons what led to the downfall of the conglomerate and the market
leader in telecom sector during the 2000s, RELIANCE COMMUNICATION. Here are some
of them explained:
4.1 Being Stubborn with the old tech
When GSM was the new thing in providing high end internet speeds (speeds that were
considered to be fast in 2006), Anil Ambani’s RCom decided to go with the CDMA. The
reason: CDMA was cheaper. Additionally, it had the capabilities of the GSM to some extent.
“Optimizing Telecom at Cheaper Rate but with exclusive technology”-it was something that
Anil Ambani thought at that time. The technology was limited until 2G and 3G. Hence, the
technology and with that RCom flourished till 3G was a popular choice. The game turned
completely upside down when 4G came to India, RCom began to struggle in the competitive
telecom industry. As a result, by 2008, Reliance Communications already had taken loan
worth ₹25,000 crores. A total of 66% of Anil Ambani’s wealth was a part of RCom but he
failed to keep his company on tiptoes with as the time passed.
Came the year 2010 and with that Anil Ambani’s problems started to pile up! Despite facing
a roadblock in its deal with GTL Infra, he made a wrong decision by making investments
several projects like the expansion of 3G and under-sea cable. However, when time came,
RCom was not able to accommodate the new internet speeds.
While GSM technology evolved with time, and it became a foundation of new advances in
telecommunication advances, RCom was stubborn enough to not leave CDMA at any cost.
As a result, as the telecom-tech progressed, RCom stopped progressing. Consequently, when
time came, The Reliance Communication’s hardware was obsolete. Therefore, the company’s
services were not in demand anymore.
Reliance communications offered CDMA based service while GSM based service was
offered only in the later stages. CDMA subscribers are generally bound to their operator as
the no. of operators offering CDMA service is very less.
CDMA mobiles did not use to have SIM in the initial years and the subscriber needed to
restrict himself to the operator that he initially subscribed. Later on SIM based mobiles were
introduced providing consumers the option to change the operator if at all he wanted to
change.
But, the no. of models available with CDMA technology is very less compared to the options
available to a GSM based subscriber. GSM Subscribers of other operators were frequently
changing their mobiles and/or their operators depending on their affordability and the
schemes offered by the rival operator. This kind of flexibility was not available to CDMA
subscribers because of the limited no. of manufacturers making cdma phones and the limited
no. of operators using CDMA technology. These factors severely affected cdma operators
like RCom, Tata Docomo, Mts etc.
Even though the voice quality of CDMA mobiles was better than that on gsm mobiles,
consumers preferred the flexibility that GSM offered.
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RCom also ventured into GSM based mobile services. But it was too late by that time. Rival
operators have made huge gains in gaining subscribers by then.
4.2 Involvement in 2G Scam
The Centre for Public Interest Litigation filed the first petition against the Union of India for
irregularities in awarding 2G spectrum licenses. The petition alleged that the government lost
$15.53 billion by issuing spectrum in 2008 based on 2001 prices, and by not following a
competitive bidding process. This led to further petitions, and an investigation began in 2010.
Even though there was no conclusive evidence of involvement of Reliance Communications
in the 2G spectrum case, the company was already in a dire position due to the loans taken
for procuring GSM services and not generating the expected revenue. Meanwhile, the whole
telecom sector had taken a massive hit due to the case. This was worsened when 3 executives
of RCom were jailed which tumbled the stock prices of RCom, plummeting down to 97%
from the all-time highs of 2008 which has not yet recovered. This acted like a catalyst for the
company which was already going downhill.
Why RCOMM couldn’t recover from its unplayable debts:
The company had signed many agreements and refinancing with many institutions which led
to high [Link] in 2011 the company signed facility agreement with China Bank
Development bank which includes ₹6000 crore for refinancing 3G spectrum fee payment by
the company and ₹2700 crore for equipment imports from Chinese [Link] in 2012 the
company ties up refinancing for redemption of outstanding FCCBs of USD 1.18 billion
(~₹6125Cr).The company signed the final definitive agreements with ICBC CDC and EXIM
for refinancing its outstanding FCCB’s as mentioned earlier. In 2013 the company entered
into a billion-dollar contract with Alcatel-Lucacent in a bid to improve network performance
and it also launched a 1 billion USD managed services contract for wireline and wireless
services with the company Ericsson.
Because of the above-mentioned deals and many others, the Rcom’s debt balloons to ₹35,600
crores in 2013.
At this point Jio was making its way in the telecom industry as the non-compete was signed
off by the Ambani brothers in 2010.
In order to settle the debt, Reliance telecom decided to lease off its towers to Jio popularly
known as the tower deal. R- Com leased out 45,000 of its rooftop and ground towers to
reliance Jio in a pact worth of 12,000 crores.
Though the deal may sound like a relief for R-Com but it wasn’t. Economic times quoted
“ RELIANCE COMMUNICATION TOWER DEAL FAILS TO IMPRESS” because
after the deal , the following Friday R-coms shares fell by 1.4% and on Tuesday it fell
sharply by 6.4% in a single day. This was the third consecutive session of falling stock price
for the company which has been in the process of increasing the efficiency of its
infrastructure in a hope to grow the stagnant revenue and cut the debt burden. The stock of
the company has lost 12.4% since the deal was announced.
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While the debts and the interest were increasing for R-com while the revenue was constant, in
2016 Jio enters the telecom industry with a bang affecting reliance communication.
RCom, owed banks $7 billion as of March 2017 when it last made public its debt level, and
more to vendors. The company now struggled under heavy debt and reported a string of
losses during a price war, triggered by the market entry of Reliance Industries' telecoms
venture Jio, owned by Mukesh Ambani. The cut-price competition had prompted RCom to
reduce operations by shutting down its wireless business. With the debts increasing and Jio
entering the telecom industry R-Com announces merger with Aircel.
For RCom, the merger was part of a plan to pare its ₹45,000-crore debt. Under this plan, post
the merger with Aircel, Reliance was to sell 51 per cent stake in its tower assets to Brookfield
for ₹11,000 crores. Without the Aircel deal, the tenancy ratio and the total number of towers
will come down; the tower deal may therefore have to be renegotiated at a lower valuation.
Meanwhile in 2016 relationships between the two companies Rcom and Ericsson start to sour
as Rcom struggles to pay Ericsson on time. Ericsson alleges Reliance defaulted on payments,
even after several assurances.
In 2017 Ericsson terminates MSA and approaches NCLT, it issues notice for termination of
MASA, stating that Rcom breached the agreement by not paying its dues. In the same month,
Ericsson approaches the Mumbai bench of the National Company Law Tribunal(NCLT) to
recover dues worth over Rs 1100 crore
As soon as the case was filed Rcom and Aircel merger was called off. It was stated that it
was due to legal and regulatory uncertainties by vested interests, have caused inordinate
delays in receipt of relevant approvals for the proposed transactions. For RCom, the merger
was part of a plan to pare its ₹45,000-crore debt. Under this plan, post the merger with Aircel,
Reliance was to sell 51 per cent stake in its tower assets to Brookfield for ₹11,000 crore.
Without the Aircel deal, the tenancy ratio and the total number of towers will come down; the
tower deal may therefore have to be renegotiated at a lower valuation. “With the merger off,
one will have to see if Brookfield will go ahead with the stake buy and at what price,” said a
telecom analyst. RCom had also put other assets, including real estate and optical fibre, on
the block, but is yet to find buyers.
In 2018 Rcom manages to sell wireless spectrum, tower, fibre and media convergence
nodes to reliance jio. In all, the mega deal packed in 122.4 MHz of 4G spectrum in the
800/900/1800/2100 MHz bands, over 43,000 towers, 1,78,000 kilometres of fibre and 248
media convergence nodes for an estimated price tag of Rs 25,000 crore. With the conclusion
of fibre monetisation deal, 1,78,000 kilometers fibre stand transferred to RJIO, which is
gearing up to offer ultra-high-speed fixed line fibre broadband for homes and enterprises
across 1,100 cities. RCom had announced completion of the sale of its media convergence
nodes (MCNs) and related infrastructure assets, worth Rs 2,000 crore to Reliance Jio.
In 2018, NCLT initiates insolvency, RCom agrees to pay Rs 550 crore. NCLT accepts a
petition of Ericsson and initiates insolvency proceedings.
On May 29, RCom offers an upfront payment of Rs 550 crore to Ericsson, as a settlement, on
condition that Ericsson withdraws the insolvency application. Anil Ambani gives a personal
guarantee for the payment to Ericsson.
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August 2018 - Matter Reaches Supreme Court-On August 3, the matter reaches the Supreme
Court which orders RCom to pay Rs 550 crore to Ericsson towards the dues by September
30. Sept 2018 -- RCom fails to comply, Ericcson files a contempt petition-RCom misses the
September 30 deadline and seeks an extension of the deadline by 60 days from Ericsson.
Ericsson refuses and files contempt of court petition in the Supreme Court against Anil
Ambani. RCom moves the court for an extension of the deadline, but the plea is dismissed.
February 2019 - Supreme Court sets March 19 deadline to pay-The Supreme Court holds
Anil Ambani and three RCom companies guilty of contempt of court for not complying with
the undertaking to settle the Rs 550 crores dues of Ericsson. The Court grants an opportunity
to Anil Ambani to overcome contempt by paying Ericsson the balance amount after
deducting the Rs 118 crore already deposited in the Court. The Court sets March 19 as the
deadline and says a default would result in Ambani facing three months’ imprisonment.
March 2019 - Anil Ambani pays Rs 462 crore, avoids a jail term. Meanwhile the company
had filed for bankruptcy, RCom had debt of Rs 46,000 crore, with 53 financial creditors —
including local and foreign banks, nonbanking financial companies and funds — laying
claims.
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