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After a period of relative quiet over the past year, punctuated by occasional family disagreements, the Anil Dhirubhai Ambani Group (ADAG) is stirring into action. It is consolidating its various businesses in an effort to become an integrated communication services provider.

Under the chairmanship of Anil Ambani, the group has been effecting a series of changes, starting with its entry into the stock markets in March 2006.

Reliance Communication Ventures Limited (RCoVL) was established as the holding company for top CDMA operator Reliance Infocomm, GSM services company Reliance Telecom, bandwidth company Flag Telecom, and Reliance Communication Infrastructure. RCoVL is now the listed flagship company of ADAG, which also has interests in utilities, mutual funds, financial services and the media.

Recently, in an extraordinary general meeting, shareholders approved RCoVL's plans to merge its nine subsidiaries under its umbrella. The companies to be amalgamated are Reliance Infocomm (the second largest mobile player in the country), Reliance Communications Infrastructure (the equipment arm), Reliance Communications Solutions (RCS), Reliance Software Solutions (RSS), Reliance Communications Technologies (RCT), Ambani Enterprises, Reliance Business Management (RBM), Formax Commercial, and Panther Consultants.

The reason for doing this is to have one consolidated entity in which the promoters will have an unshakeable 63.88 per cent stake. Currently, the promoters hold 39.62 per cent of RCoVL: 38.27 per cent is held directly; and another 1.35 per cent is held through persons acting in concert. The rest is held by domestic institutions and public and foreign institutional investors. After the amalgamation through a share swap deal, this holding will go up to 63.88 per cent with the direct stake of the promoters being 63.07 per cent.

According to RCoVL officials, the current holding structure of the Infocomm companies –­ RIC, RCIL and Formax –­ is complex. "The proposed plan will rationalise and simplify the structure of holding so that there will be an alignment of interests of all shareholders in a single listed entity," says an RCoVL official.

The amalgamation will also eliminate any potential conflict of interests and make operations easier. The other benefit of the new entity will be its ability to leverage the large combined asset base, reserves and cash flows. Analysts also believe that the merger will offer competitive advantages to exploit future growth opportunities, besides generating cost savings and economies of scale that will significantly enhance the earnings potential.

In line with the objective of keeping things simple, the group is planning to change the company's name from RCoVL to Reliance Communications –­ a single entity that will offer a bouquet of services that includes wireless and wireline telephony, international and domestic long distance telephony, voice, data, broadband, internet and other valueadded services.

RCoVL is also ready to go ahead with its $1 billion sponsored global depository receipt (GDR) and American depository receipt (ADR) issue announced in May 2006, which includes a greenshoe option of 20 per cent of the offer size. Confirming the development, a senior official at ADAG said: "The board, at its absolute discretion, will have the right to retain additional equity shares for the purpose of over-allotment, not exceeding 20 per cent of the offer size.

With this overseas listing, the company hopes to become more visible on the international map. It will also help it formalise deals with foreign telecom companies or private equity firms that are interested in picking up a stake in Reliance Telecom Limited (RTL), RCoVL's GSM business. RTL, a wholly owned subsidiary of RCoVL, is not to be merged with RCoVL.

For Reliance, these steps have become necessary as it plans to aggressively ramp up capacity to win a greater share of the world's fastest growing and cheapest mobile market.

In terms of subscriber numbers, RCoVL, with 21.5 million subscribers as of May 2006, is second only to Bharti Airtel, which has 21.86 million subscribers. Bharti is India's only other listed telecom company with a nationwide footprint.

RCoVL has also obtained shareholder approval to raise the foreign fund holding limit to 74 per cent from 26 per cent. This was an important step as, according to Anil Ambani, "a lot of global companies have talked to us for a partnership in our businesses".

However, the proposals of both RCoVL and Bharti to increase its foreign holding up to 74 per cent have been held up in the files of the Foreign Investment Promotion Board (FIPB). The Department of Telecommunications (DoT) has said it needs more time to examine the matter.

RCoVL had asked for approval to increase the limit for purchase and sale of up to 74 per cent of the company's stake in shares and convertible debentures from the market by foreign institutional investors under the Portfolio Investment Scheme.

The foreign shareholding of the company as of March 2006 was 26.17 per cent, of which FIIs held 19.85 per cent. When the proposal came up in the last FIPB meeting, DoT sought a deferment, arguing that it needed more time.

Meanwhile, in a recent development, RCoVL has reportedly approached the government seeking spectrum in the 1800 MHz band to start GSM services. It has applied for GSM licences in Mumbai and Delhi to begin with.

All these are steps forward for the group in its attempt to steam ahead with its numerous plans after consolidating and integrating its businesses.