India’s Reliance Communications (RCom) and Reliance Jio have signed agreements to trade and share spectrum in the 800 MHz band across most of the country. RCom is also moving forward with its planned three-way merger with SSTL and Aircel as it continues talks to sell towers to two US suitors.
India’s Reliance Communications (NSE:RCOM) and Reliance Jio have signed agreements to trade and share spectrum in the 800 MHz band across most of the country.
The two operators, owned by brothers Anil (pictured) and Mukesh Ambani respectively, announced today that their strategic partnership would also include roaming agreements for individual service areas (circles).
Mumbai-based RCom, the country’s fourth largest mobile operator, will sell 800 MHz spectrum in nine circles to new entrant Jio, and the pair will share 800 MHz bandwidth in 17 circles.
According to local media reports, RCom will raise about Rs45bn (US$664.7m) from the spectrum sale.
The additional airwaves will help Jio in its nationwide LTE network rollout, boosting coverage and service quality, the companies said.
Meanwhile, RCom will benefit from access to Jio’s network under the reciprocal sharing and roaming agreements, they added.
“The spectrum arrangements between Jio and RCom will result in network synergies, enhanced network capacity and will optimise spectrum utilisation and capex efficiencies,” they said, adding that they both expect considerable savings in operating costs and network investment.
Bernstein Research analyst Chris Lane said that, if successful, the agreements would make RCom and Jio the only operators in to offer 4G on a low frequency spectrum band, “substantially” improving their network coverage.
The agreements are subject to the liberalisation of RCom spectrum in the 800 MHz band and requisite approvals.
Last week, the Department of Telecommunications (DoT) reportedly directed RCom to pay Rs69.53bn (US$1.03bn) to liberalise airwaves across 16 circles. Of this, Rs53.84bn (US$795.27m) corresponds to the determined market price, while the remaining Rs15.96bn (US$235.8m) is a one-off spectrum usage charge.
RCom will use the proceeds from the spectrum sale to help pay the liberalisation fee, along with funds raised from recent real estate disposals, according to local reports.
RCom said in a stock exchange filing last week that it is still awaiting the DoT’s decision on liberalising spectrum in a further four circles.
Stock exchanges clear SSTL merger
Meanwhile, RCom has announced that the Bombay and National stock exchanges have given the green light to its planned takeover of smaller rival Sistema Shyam Teleservices (SSTL) from Russian conglomerate Sistema.
“The company and SSTL are proceeding to file necessary application with the Bombay High Court and Rajasthan High Court respectively for approval of the [deal],” it added.
RCom reached an agreement to acquire SSTL, the number nine mobile operator, last November.
SSTL, which will pay off existing debt prior to the tie-up, will hold a 10% equity stake in the combined company.
As part of its objective to remain a strong number four player, RCom announced in late December that it had entered talks to buy Aircel from shareholders Maxis Communications (MYX:6012) and Sindya Securities and Investments Private Limited. Announcing a 90-day exclusivity period, it said they would “consider the potential merger to mutually derive the expected substantial benefits of in-country consolidation, including opex and capex synergies and revenue enhancement.”
Meanwhile, RCom has also reportedly extended its talks to sell towers to US-based telecoms infrastructure firm Tillman Global Holdings (TGH) and private equity firm TPG Asia.
According to local media reports last week, the talks will now run until the end of January.
RCom entered into a non-binding agreement to sell its tower assets and related infrastructure to the two US firms in early December last year. Under the initial agreement, the proposed deal, worth a reported Rs215bn (US$3.17bn), would see the assets transferred from RCom’s tower unit Reliance Infratel on a going concern basis into a separate special purpose vehicle owned by TGH and TPG.
Jio’s entry is expected to trigger a wave of consolidation that would shrink the market to five or six players: Bharti Airtel, Vodafone and Idea Cellular, Reliance Jio, state-run BSNL-MTNL and perhaps another merged entity, said Bharti Enterprises chairman Sunil Mittal in early December.
