Friday, Jun 07, 2013
By R. Jai Krishna
NEW DELHI--Reliance Jio Infocom Ltd., the telecom venture of Reliance Industries Ltd. (500325.BY), signed an agreement Friday to share the telecom tower infrastructure of Reliance Communications Ltd. (532712.BY), India's third-largest telecom company by number of users.
Reliance Jio will use up to 45,000 telecom towers owned by Reliance Communications as it gears up to launch fourth-generation telecommunications services. The deal is valued at about 120 billion rupees ($2.11 billion), the companies said.
The agreement will allow them to add other towers as needed, according to the statement.
It will also create savings for both companies in terms of capital spending and the operating costs of building and maintaining telecom towers, one of the largest expenses for telecom companies in the South Asian nation.
This deal is the second involving India's most famous billionaire brothers--Mukesh and Anil Ambani--and comes almost eight years after they their business empire. In April, the two companies signed a pact allowing Reliance Jio to share Reliance Communications' optic-fiber network across the country. At that time, they had indicated they would continue to work together in the telecommunications space.
The brothers split the conglomerate built by their father, Dhirubhai Ambani, in 2005 following their father's death.
The telecom business, along with operations such as power, infrastructure and finance, went to Anil Ambani, the younger brother. Mukesh Ambani got Reliance Industries, which focuses mainly on petrochemicals.
The initial agreement between the brothers didn't allow them to compete against each other.
In May 2010, the two sides amended that agreement. A few months later, Reliance Industries reentered the telecom business by buying 95% of Infotel Broadband Services Ltd., which owned radio-wave spectrum for high-speed broadband services. The telecom venture, now named Reliance Jio Infocomm Ltd., is preparing to launch communications services based on fourth-generation technology.
Reliance Communications, the flagship company of Anil Ambani's Reliance Group, offers telecom services ranging from voice to data.
The deal will bring in much needed funds for debt-laden Reliance Communications. It had more than $6 billion in debt at the end of December, taken on mostly in 2010 to buy bandwidth to provide third-generation services and expand its network. To cut its debt, Anil Ambani had tried unsuccessfully to sell stakes in Reliance Communications, its tower unit as well as an undersea cable network in the past few years.
Reliance Industries is cash-rich--it had cash and cash equivalents of about 830 billion rupees at the end of March.
Write to R. Jai Krishna at krishna.jai@dowjones.com
(END) Dow Jones Newswires
07-06-13 0632GMT
