Anil Ambani grabbed the headlines in the family split for a variety of reasons. He was the original whistleblower showing just how wrong things were in the Reliance empire (that this was just opportunism, of course, was not evident then) and, from a situation in which his brother virtually cut him off from the empire, he's now walked away with a valuable chunk of it, including the only company brother Mukesh really created from scratch, Reliance Infocomm.

Yet, for all his bravado and the one-liners such as the one about how his new company has no back gear, Anil Ambani has his work more than cut out for him. For while Mukesh has the proven cash cows, Anil has the cash guzzlers with an uncertain future --sure, the upside is phenomenal, but so is the risk.

The Reliance 'ownership' issues

While Reliance Energy's [Get Quote] future can look bright only after the state governments genuinely open up the power sector through open access and the state electricity boards become viable entities (both will take years), it is Infocomm that is the more serious problem.

For one, the ADC-avoidance cases (where Infocomm pocketed the access deficit charge payable to BSNL by disguising international calls as local ones) are still going on and BSNL has slapped new demands on Infocomm last week.

This, of course, may not be a worry for Anil Ambani as he's probably used the existing cases, and the possibility of future criminal liability (changing the caller IDs is illegal as it prevents tracing of calls), to lower the value of Infocomm in the settlement he's made.

More worrying, from his point of view, is that so far, the company's been more than a bit of a dud. It has roughly the same number of subscribers as Sunil Mittal's Bharti, but earns only around 60 per cent of the revenue.

Indeed, according to a recent study by the telecom regulator, Trai, while Infocomm and Tata Teleservices [Get Quote] (both use CDMA technology) have an average revenue per user of  $5.74 (about Rs 258) per month, that for GSM players (like Bharti, Hutch, Idea, and BPL, among others) is $8.89 (about Rs 400), or around 55 per cent higher -- for companies like Hutch, which have more post-paid subscribers (where the ARPU is $20.34), the blended ARPU is around Rs 750 per month.

Even more horrifying is that Infocomm got into such a low-paying-customer rut at a time when it had no shortage of funds (when Mukesh owned it, Reliance Industries [Get Quote] poured money into it on demand, apart from Rs 8,100 crore (Rs 81 billion) of preferential capital; it even paid over Rs 3,500 crore (Rs 35 billion) for subsidised handsets during the Monsoon Hangama days) and when the best minds in Reliance worked overtime to ensure the venture was a success.

How badly the company has been run is best seen from the serious billing problems it continues to have, when billing is one of the basic things any service company gets right from day one.

Not surprisingly, Infocomm's blitzkrieg petered out even while Mukesh was in charge -- the company managed to get 6.2 million subscribers within six months of its operations as its phones/tariffs were virtually free since it did not even pay licence fees as it offered full-blown mobile services without having a licence for that. Once it began paying licence fees and could no longer afford the same level of freebies, it took the company over 18 months to get another 5 million customers.

Another factor that helped Infocomm get the additional subscribers, clearly, was the low tariffs and these, to a large extent, were funded by the money the company made in the ADC-avoidance business. None of this is available to Ambani Jr, the Reliance tap has been shut off, and presumably the ADC-avoidance game is over.

While the funds problem could be solved through an Infocomm IPO (the pricing will be an issue), the problem of getting higher-value customers is partly constrained by the choice of technology since CDMA phones cannot be used for international roaming as yet (in any case, most countries do not have CDMA networks) -- so, for all practical purposes, people with passports are unlikely to use Reliance phones.

Till date, changing handsets (and migrating from one phone company to another, like from Reliance to the Tatas or vice versa) is not possible on CDMA networks, either, and that also keeps away high-paying customers. In which case, what is Anil Ambani to do?

Apart from moving quickly to fix billing issues, moving to phones with removable chips, and developing a genuine service organisation (something the Ambanis have never done before), Anil needs to work on fixing the company's image -- given that the company has been found contravening the law twice in two years and has had to shell out around Rs 1,200 crore (Rs 12 billion) in fines alone, this is not going to be easy (clearly having 20-25 senior people dealing with government relations in Delhi, as against 5-6 in other companies, has only harmed Infocomm's operations).

Having 2.2 million square feet of office space over 14 buildings in a 140-acre space with lakes is great, but more successful companies like Bharti operate in a fraction of this. The choice of the earthy Sehwag as brand ambassador as opposed to the classier Sachin (Airtel) or Dravid (Hutch) has also ensured the brand's appeal has been to the low-paying customers.