Mumbai: Reliance Communications Ltd (RCom) has agreed to share its transmission infrastructure with the Indian arm of United Arab Emirates-based Emirates Telecommunications Corp., also known as Etisalat.
The 10-year deal is expected to yield revenues of Rs10,000 crore, RCom, India’s second largest mobile phone operator by subscribers, said in a statement on Wednesday.
Etisalat DB India Pvt. Ltd has licences for 15 out of 22 telecom areas in India. It will use about 30,000 of RCom’s 50,000 towers as it rolls out nationwide phone services.
“We will be providing end-to-end connectivity...including the last-mile connectivity. Our revenues and capital productivity increases, while for Etisalat, it is an asset-light model, which significantly lowers their roll-out costs,” said Inder Bajaj, president of Reliance Infratel Ltd, RComm’s tower unit.
New agreement: A Reliance Communications store in Bangalore. Etisalat India has licences for 15 out of 22 telecom areas in India. It will use about 30,000 of RCom’s 50,000 towers as it rolls out nationwide services. Hemant Mishra / Mint
“As a new entrant in this dynamic market, this alliance provides us with key, strategic advantages that will ensure a robust, speed to market and cost-effective rollout of services,” Mohammad Hassan Omran, chairman of Etisalat, West Asia’s second largest telecom operator, said in a statement.
Bajaj called it “a high-margin” deal but declined to give details. “The increase in cost will be marginal but most of the revenues will straight away add to the bottom line.”
He added that RCom’s tower business covered 90% of the country and the firm was in advanced talks for more tower-sharing agreements with new and existing regional firms.
A Mumbai-based sector analyst tracking RCom said that the deal was widely anticipated and already factored in the share price.
“It is a major milestone for RCom as the deal brings on board its first external tenant,” the analyst said. He didn’t want to be named.
He pointed out that although RCom was the first company to think of this, other firms had moved quicker in the tower leasing business.
Earlier this year, Unitech Wireless Ltd struck a deal with Wireless-TT Infoservices Ltd and Quippo Telecom Ltd to lease towers.
Bharti Airtel Ltd, India’s top mobile operator, Vodafone Essar Ltd and Idea Cellular Ltd have formed a joint venture that has more than 100,000 towers.
The analyst said that while the average monthly rental for a tower was Rs30,000-32,000, RCom’s rents could be lower by about one-sixth because it is a large-volume deal that spans 10 years.
Etisalat DB India had 13 area licences and procured two more from Allianz Infratech Ltd in May. Etisalat had bought a 45% stake in Swan Telecom Ltd in September for $900 million and renamed it Etisalat DB India.
RCom’s shares fell 2.17% on Wednesday to close at Rs261.85 on the Bombay Stock Exchange, tripping more than the benchmark Sensex index, which slipped 1.46% to 14,843.12 points.
Reuters contributed to this story.