Jio & RCom in tower deal

In the biggest deal since their reconciliation in 2010, the Ambani brothers have announced a Rs.12,000-crore tower sharing pact. Under the deal, Mukesh’s firm Reliance Jio Infocomm will use about 45,000 towers owned by Reliance Communications (RCOM). This deal is significant as it will help deleverage Anil’s debt-laden flagship firm RCOM, which is expected to get revenues of around Rs.800 crore annually for the next 15 years, said sources privy to the details of the agreement.
“Reliance Jio will utilize up to 45,000 ground and rooftop based towers across RCOM’s nationwide network for accelerated roll-out of its state of-the-art 4G services,” said a statement from both the Ambani firms. The statement added that the agreement provides for a joint working arrangement to configure the scope of additional towers to be built at new locations to ensure deep penetration and seamless delivery of next generation services. The two companies did not give details of the tenure of the agreement and the payment schedule.
The $2.1-billion deal comes after the Rs.1,200-crore fiber optic sharing arrangement between the two brothers signed in April which was the first deal to be struck between the two since their split in 2005.
RCOM’s arm Reliance Infratel operates towers with a tenancy ratio of 1.74, the number of tenants per tower. A tower company can have more than one operator as a tenant which basically determines its profitability. RCOM has debts to the tune of Rs.38,000 crore ($6.6 billion) on its books as on March 31, 2013.
Analysts said Reliance Jio will be able to roll out operations of its 4G operations in just about 20 cities with the 45,000 it has leased out from RCOM. RIL may strike more tower sharing deals with other operators like Sunil Mittal’s Bharti Infartel for a larger network presence. Reliance Jio cannot bank just on the 2300 MHz spectrum frequency for viable 4G operations in a low margin market.
This agreement follows the inter-city optic fiber sharing agreement already signed in April 2013 as part of a comprehensive framework of business co-operation between Reliance Jio and RCOM, said the company statement. Reliance Jio is on its way for infrastructure sharing with all the leading telcos as part of its strategy to accelerate the launch of bundled high speed data and voice on its 4G network. However, the company is simultaneously creating its own infrastructure to reduce its dependence upon its peers.