Mukesh Ambani, worth more than $21 billion, is ranked by Forbes as the richest person in India. Among his many businesses, he owns the license to launch fourth-generation telecommunications and high-speed broadband services.
His brother’s company, worth about $6 billion, has more than 150 million cellphone subscribers, has built 75,000 miles of fiber-optic cable network, and has erected tens of thousands of cellphone towers across India.
In many ways, a business tie-up was a no-brainer. So when the news broke Tuesday that the siblings had struck a $220 million deal to share the vast fiber-optic infrastructure network, many appeared ready to believe that they had finally put their painful 2005 split and years of mutual recrimination behind them.
Within minutes of the announcement, their companies’ share prices rose. Powerful ministers in the national government phoned the brothers with congratulations. Bankers and fund managers have analyzed the news seemingly nonstop on TV.
“Ambani brothers strengthen their bond on fibre-rich diet,” read the lead headline Wednesday in the Economic Times newspaper Wednesday, which hailed the move as the “dawn of a new era.”
Family-run businesses are the backbone of Indian commercial life, accounting for 85 percent of the country’s companies. Some originated during the colonial period, some around the time of independence in 1947, and others, like the Ambanis’, in what is called the “License Raj” era, from the 1960s to the 1980s, when entrepreneurs operated under strict government constraints, according to Gita Piramal, author of “Business Maharajas.”
But the entrepreneurial families — an offshoot of India’s traditional joint-family system — are changing, business historians say, because of a new generation of heirs, many of them with business degrees from the West and unprecedented exposure to foreign competition.
“All these business families are working in a very, very competitive business environment today — competing with private, public and global players,” Piramal said in a telephone interview from Mumbai. Mukesh Ambani has bought several shale gas assets in the United States, and Anil Ambani has invested in media and entertainment businesses there.
The Ambani siblings “have taken the legacy of their father and expanded their business to global standards,” she said. “But coming together to do business after a split, that, too, at this scale . . . is unusual.”
The split occurred soon after the death of the siblings’ father and the patriarch of the business empire, Dhirubhai Ambani. The two sons were nothing alike. Anil, the younger, was flamboyant, schmoozed with politicians and raised the public profile of the businesses. Mukesh was publicity-shy, busying himself with backroom business strategies. What seemed at first to be complementary traits ultimately led to the rift.
In recent years, however, their battle has bruised both their businesses and their reputations, analysts say.
Anil Ambani’s telecom business is struggling with debt, his power plants are still under construction, and profits from infrastructure investments in highways and metro rail will be long in coming.
Mukesh Ambani’s gas-exploration, oil and petrochemical business remains one of the most cash-rich companies in India, and his wealth is embodied in the head-turning home he built in Mumbai — a billion-dollar, 27-floor ode to opulence with three helipads, floating gardens and six floors just for parking, in a city characterized by miles and miles of slums. But his retail and gas-station businesses have floundered.
Is it business logic or brotherly love, though, that brought the Ambani brothers back to the table?
“It is a win-win business deal for both,” said Pradip Shah, chairman of IndAsia Fund, an investment advisory group. “While it is the helping hand that Anil Ambani needs, it also benefits Mukesh Ambani, who gets ready-made telecom infrastructure cheap.”
Family ties played a role as well. The siblings’ mother had made an earlier attempt to bring about a reconciliation, including a family visit to their ancestral village where everybody danced together wearing traditional attire. But the wheels of peace really began to turn during the run-up to the recent wedding of their sister’s daughter.
“The preparations for the marriage began about eight months ago and acted as a thaw, and that is also the time when the telecom discussions started,” said a family observer, who spoke on the condition of anonymity because he is not authorized to reveal details. “It was the first wedding in the family in 22 years, a happy occasion. The two brothers met frequently to plan the wedding, to discuss who will organize and host which event. There was plenty of opportunity for private meetings minus the acrimony.”
Then he added: “Anybody who was looking for a hint of a patch-up could have spotted it at the wedding.”