The much-anticipated telecom partnership between the Ambani brothers kicked off formally on Tuesday with Mukesh Ambani-led Reliance Jio Infocomm signing a definitive agreement with the Anil Ambani-led Reliance Communications (RCom) for sharing the latter’s nationwide inter-city fibre optic network infrastructure.
Under the terms of endearment, Reliance Jio will pay Rs1,200 crore as one-time “indefeasible” — meaning the contract can’t be annulled or voided, come what may — right to gain access to multiple fibre pairs across RCom’s 1.2 lakh kilometre inter-city fibre optic network to roll out 4G data services. That’s about Rs1 lakh per km of optic fibre.
"The all-cash deal is expected to be closed within the quarter, when RCom makes the fibre available to RIL,” a RIL spokesperson said.
RCom has the largest optic fibre network in India, as well as overseas, totalling 2.8 lakh km.
Both stocks gained on the news, with RIL closing the day up more than 2% and RCom as much as 11%. Analysts see the partnershipas a win-win for both companies. For RCom, it means a small reduction in its Rs37,361 crore debt.
“While the initial payout of Rs1,200 crore will be the first step in reducing the debt burden, the leasing out of towers, sharing of network costs and more all comes as a big win for RCom,” said Kamlesh Bhatia, research director, Gartner.
For RIL, it would mean a much faster 4G rollout with minimal spend to catch up with Airtel, which already offers 4G in six cities.
“For RIL, time to market is the biggest advantage of this partnership,” said Bhatia.
While RIL has not specified any timeline for rolling out 4G services, sources said the company is also in discussions with several other companies for tower sharing and buying of 4G equipment. RIL may also look at other optic fibre providers, such as Tata Communications and BSNL, for rolling out optic fibre in various cities, if the need arises.