When Mukesh Ambani entered the telecom sector again with Reliance Jiocom after buying 95 per cent stake in Infotel Broadband services, there was speculation that he will prove fatal to certain companies which don’t have the shock absorbers. Rather, the recent developments indicate exactly the opposite. As he speed dials telecom sector tie-ups, it has come to rescue the wedding firms. And analysts say it should be seen as the revival of telecom sector post Supreme Court judgment on 2G in February last year. After singing two deals for under-sea cable, on Tuesday, Bharti Infratel, the tower arm of Bharti Airtel, said it will talk to the telecom units of Reliance Industries to lease out its towers.
“We would definitely be in talks with them, we would like to do more and more business with them. So as far as we are concerned...They are very credible customer, so we would definitely be in touch with them,” Bharti Infratel Vice Chairman and Managing Director Akhil Gupta said. Gupta, however, added no contract is being signed at the moment. “As a tower company, it’s my job to go to every operator, existing as well as prospective,” he added.
last week, RIl took a step closer to launching 4G telecom services with a deal to lease undersea cable capacity from Bharti Airtel. As per the deal, Reliance Jio will use Bharti’s submarine cable network to provide data connectivity across Asia Pacific.
Showing the aggression of a shrewd business man, the typical of Mukesh, on Tuesday itself, Reliance Jio signed another deal with a consortium of global telecom majors, including Vodafone, for constructing the Bay of Bengal Gateway (BBG) submarine cable system that will link Malaysia and Singapore to the Middle East with connections in India and Sri lanka. The cable system is likely to carry commercial traffic by the end of 2014.
“...Consortium members -- Telekom Malaysia Berhad (Malaysia), Vodafone Group (UK), Omantel (Oman), Etisalat (UAE), Reliance Jio Infocomm (India) and Dialog Axiata (Sri lanka) -- signed the construction and maintenance agreement and the supply contract for BBG (Bay of Bengal Gateway) in Kuala lumpur today,” Reliance Industries said in a statement.
The BBG submarine cable system, spanning around 8,000 km, will link Malaysia (through Penang) and Singapore to the Middle East (Oman and United Arab Emirates) with connections reaching out to India (Mumbai and Chennai) and Sri lanka, it added.
The announcements on Tuesday come after two major and surprising deals with his estranged brother Anil Ambani and arch rival Sunil Bharti Mittal in the last few weeks.
Deals in last few weeks show there are no rivals in economy of business
last week, Mukesh and Mittal, both seen as arch rivals to launch a bitter 4G telecom war, surprised everyone with an alliance to share the latter’s submarine cable network.
The announcement was followed by Reliance Jio striking an optic fibre sharing deal with his younger brother Anil’s Reliance Communications. The brothers struck a Rs 1,200-crore deal wherein Mukesh will use Anil’s optic fibre network for launch of Jiocom. The agreement gave lifeline to RCom which reported net debt of around Rs 37,360 crore as on December 31, 2012. RCom has been looking to sell stake in its tower firm Reliance Infrastructure but has not found any suitors yet.
Analysts say the agreement between the Ambani brothers, their first business pact after parting ways eight years ago, will help both the companies postitively as the younger brother is cash strapped. In fact, the deal between the two was seen as Mukesh closing the doors on others for similar infra sharing deals. But the deal with Mittal surprised all and signaled that they are not heading towards a battle. Telecom infra sharing is common place among rivals worldwide.
Both the deals surprised the market and analysts see the developments taking telecom sector out of woods as a great part of telecom infrastructure was underutilised - thanks to 2G scam which resulted into a number of companies either winding up their business or “optimising” their operations.
Future
Now analysts say that Mukesh’s ambitious return to telecoms would ride on more efficient, cost effective networks wherever available and such shared telecom infrastructure agreements are routine in the whole world. The sector will witness more such deals in a debt-laden industry keen on keeping up growth and controlling capital expenditure. Experts say both Airtel and RCom will be in the reckoning as Reliance Jio seeks more infra link-ups. Airtel, through Bharti Infratel and a 42 per cent equity ownership in Indus Towers, had an economic interest in about 81,389 towers and RCom has about 55,000 towers.
However, now experts expect a spectrum sharing regime to take out the beleaguered telecom sector out of woods completely. Sharing of spectrum is critical for productive use of national resources to have viable operators and affordable prices Substantiating the market views, an HDFC report on the sector said that telecom is getting out of the woods and Jio will be a trendsetter in the telecom sector.
Sector analysts are now not ruling out a deal with RCom for tower sharing also. Immediately after the under- sea cable pact, the company had said, “This agreement is the first in an intended comprehensive framework of business co-operation between Reliance Jio Infocomm and Reliance Communications to provide for optimal utilisation of the existing and future infrastructure of both companies on reciprocal basis, including inter-alia, inter-city fiber, towers and related assets.”
Now it is to be seen whether Mukesh will go for Anil’s Reliance Infratel or Indus Towers (a JV of Airtel, Vodafone and Idea Cellular) for tower sharing pact.