Mumbai: India’s second largest mobile telephone operator by subscribers, Reliance Communications Ltd (RCom), is close to signing a multi-year tower sharing agreement with Gurgaon-based Aircel Ltd, potentially earning it revenues of about Rs1,500 crore over the contract period.
This will be the third such deal in the past six weeks for Reliance Infratel, RCom’s 95%-owned tower and optic fibre network subsidiary, as it continues to tie up with newer and smaller phone operators looking for nationwide coverage at lower costs.
RCom, which is promoted by Anil Ambani, is expected to announce the deal with Aircel in a couple of days when the paperwork is complete “for an end-to-end telecom infrastructure agreement that will include towers, voice carriage and bulk bandwidth”, said an industry official close to the development, adding that the 10-year deal could mean an assured “revenue upside of over Rs1,500 crore”. He did not want to be identified.
Greater connectivity: Reliance Communications, through Reliance Infratel, has roughly 50,000 towers. Harikrishna Katragadda / Mint
On 22 July, RCom announced a similar 10-year telecom infrastructure sharing agreement with the Indian arm of Abu Dhabi, UAE-based Etisalat group that will generate Rs10,000 crore in revenues, its biggest order to date. Etisalat is rolling out wireless services in 15 of 22 circles. Last week, RCom announced a similar tie-up with new local operator S Tel for its services in the six circles it has licences for.
An Aircel spokeswoman denied the development, calling it “market speculation”. An RCom spokesperson declined comment. Aircel currently operates in 18 circles and is looking to become a nationwide operator by the end of March 2010. The telecom operator, owned as a 74:26 joint venture between Maxis Communications Bhd of Malaysia and Sindya Securities and Investments Pvt. Ltd, is neither as big a revenue catch as Etisalat nor a newcomer such as S Tel, but the deal could be crucial for Reliance Infratel business plans.
“This deal is much smaller than the Etisalat one but given that it’s third in a row in such a short time, it becomes significant,” said a Mumbai-based telecom analyst with a domestic brokerage. “This will create some excitement around Reliance Infratel and lend more visibility on its revenue stream, especially come in handy if the management is looking at fund-raising activities in the near future.”
The RCom-Aircel agreement will cover all the circles where it is present currently as well as the remaining circles as they are added to the network.
Such tower tenancy deals, by using pre-existing infrastructure, typically ease as well as speed up multi-circle rollouts for newer operators at lower costs. Tower owners such as RCom also earn assured sums over long periods with marginal increase in costs. Inder Bajaj, president of Reliance Infratel, RCom’s tower unit, while speaking to Mint about the Etisalat deal in July had said that the “increase in cost will be marginal” but that most of the revenues “will straightaway add to the bottomline” in such a business model.
RCom, through Reliance Infratel, has roughly 50,000 towers and around 190,000km of nationwide optic enabling transmission connectivity currently.
Aircel, on the other hand, is carving out its roughly 12,000 towers into a separate company and, according to a 10 August report from IIFL Capital, has put it on the block. Calling the Aircel sale the “centre of action”, IIFL Capital’s analyst G.V. Giri wrote that the company had “asked for pure cash bids” for its towers, most of which are in Aircel’s old circles in the North-East and Tamil Nadu as it raises funds for expansion.
Shauvik Ghosh in New Delhi contributed to this story.