Mumbai, Dec. 10: Mukesh Ambani and Sunil Mittal have sewn up the most comprehensive telecom infrastructure deal in the country that could set off alarm bells in the industry.
Financial details of the deal weren’t given today but it is clearly bigger and more comprehensive than the two deals that Reliance Jio Infocomm Ltd (RJIL) signed with Anil Ambani’s Reliance Communications earlier this year.
RJIL, the telecom entity in which the Rs 3,71,119-crore Reliance Industries has a 95 per cent stake, today entered into a comprehensive agreement with Bharti Airtel that entails the sharing of optic fibre network, submarine cable networks, telecom towers and Internet broadband services.
The arrangement between Reliance Jio, which was the only telecom player to win a pan-India broadband wireless access spectrum in the June 2010 auction, and Bharti Airtel can be extended to roaming on 2G, 3G and 4G, and any other mutually beneficial areas. These will include — but not be limited to — jointly laying optic fibre or other forms of infrastructure services.
The agreement said: “The pricing would be at ‘arm’s length’, based on the prevailing market rates.”
Reliance Jio became the first telecom operator to win a pan-India unified licence on October 25 that allows it to offer all telecom services, including voice telephony.
The arrangement is critical as it could mark the entry of Mukesh Ambani into the arena of voice telephony. The Centre is planning to conduct 2G spectrum auctions in January and there is a strong possibility that Reliance Jio will toss its hat into the ring.
The two partners, however, did not disclose what other opportunities they were looking to pursue. Sources close to the two telecom players said the agreement was still evolving and details on this front would be shared at a later stage.
The deal will clearly spook the competitors in the telecom space.
Last week, Kumar Mangalam Birla, chairman of Idea Cellular, articulated the fears of the industry in a media interview: “The entry of Reliance in the telecom space will cause some amount of anxiety…this is something that could be a potential game changer…everybody in the industry is waiting to see what happens.”
When Reliance Jio won a pan-India licence for broadband wireless access (BWA) spectrum in the June 2010 auctions for which it paid Rs 12,847.77 crore, it was thought that it would confine itself to data services. But after the field opened up with the introduction of a unified licensing regime that allows telecom players to offer any service that they wish to, the buzz is that Reliance Jio is likely to bid for 900MHz spectrum.
According to Reliance Jio, the co-operation is aimed at avoiding duplication of infrastructure, wherever possible. Bharti Infratel, a subsidiary of Bharti, has 35,376 towers in 11 telecom circles across India.
This is not the first time that the senior Ambani is teaming up with Sunil Bharti Mittal.
In April, the companies had signed a deal under which Reliance Jio can use the data capacity of the i2i submarine cable. This network connects India to Singapore and is wholly owned by Bharti. Under the deal, Reliance Jio will have access to a dedicated fibre pair on the network.
The first inkling of a closer co-operation with Bharti Airtel came yesterday when Mukesh Ambani told reporters in Mohali that his company was open to a partnership with Bharti Airtel to improve the telecom network for 4G services in the country.
Airtel was the first to launch 4G services in the country in April 2012 and provides the service in four circles — Calcutta, Maharashtra, Punjab and Karnataka.
The agreement with Bharti is seen as part of the asset-light, partner-heavy strategy that Mukesh Ambani has spoken about in the past.
In April, Reliance Jio entered into a Rs 1,200 crore deal with Anil Ambani’s Reliance Communications Ltd (R-Com) to use its 1,20,000 km inter-city fibre optic network.
Subsequently in June, both the companies entered into a Rs 12,000 crore deal wherein the RIL subsidiary won the right to use 45,000 ground and rooftop-based telecom towers of R-Com to launch fourth-generation (4G) services.
Observers here said the scope of the latest arrangement with Bharti was much wider than that with R-Com.