Reliance Jio Infocomm, the telecoms subsidiary of Indian conglomerate Reliance Industries (RI), has signed a Rs12bn (US$2.1bn) tower sharing agreement with local mobile operator Reliance Communications (RCom).
Under the partnership, Reliance Jio will…
Reliance Jio Infocomm, the telecoms subsidiary of Indian conglomerate Reliance Industries (RI), has signed a Rs12bn (US$2.1bn) tower sharing agreement with local mobile operator Reliance Communications (RCom).
Under the partnership, Reliance Jio will utilise up to 45,000 ground and rooftop-based towers across RCom’s nationwide network, allowing it to launch 4G services, the companies said in a joint statement. They have also agreed to potentially build more towers together “to ensure deep penetration and seamless delivery of next generation services”.
The agreement, sealed today, further highlights the thawing of relationships between the once-estranged Ambani brothers. Reliance Industries is controlled by Mukesh Ambani, India’s richest man, while RCom is owned by his younger brother Anil.
Following the death in 2002 of their father, Indian business magnate Dhirubhai Ambani, the empire was split between the two brothers. In 2005 a dispute over the supply of gas between the two companies meant the brothers stopped talking to each other.
But in April this year, the two companies signed an inter-city optic fibre sharing agreement as part of a comprehensive business cooperation framework.
The main benefits for RCom, one of India’s largest mobile operators, include the opportunity to cut its debt load, which currently stands at approximately Rs374bn (US$6.8bn).
The agreement may also lead to more M&A opportunities for the carrier, Rohan Dhamija, head of India and South Asia at Analysys Mason, suggested. He told TelecomFinance in April that in case of a leasing agreement with Reliance Jio, RCom’s “tower assets could become more attractive to a private equity fund.”
RCom has on several occasions attempted to divest its towers in the past.
For Reliance Jio, this partnership will allow it to enter the mobile market. In 2010 RI had acquired Infotel Broadband, later renamed Reliance Jio Infocomm, the only company to have secured a pan-Indian 4G licence.
At the company’s AGM yesterday (6 June 2013), Mukesh Ambani reportedly said that RI would invest Rs1.5 trillion (US$26bn) in key areas, but he did not disclose how much would be allocated towards 4G and when services would be launched.
Whether RCom and Reliance Jio will eventually merge their operations in India’s crowded mobile market remains uncertain. But Dhamija concluded, back in April, that “the impact on the Indian telecoms market will likely be significant, with two giants with deep pockets coming together.”
