Reliance Jio looking to partner local cable firms in broadband push
The tie-up will allow the telecom firm get last-mile connectivity for its broadband services
Mumbai: Reliance Jio Infocomm Ltd, which is scheduled to launch fourth-generation (4G) telecom services along with a broadband business later this financial year, is looking to partner with, or acquire, local cable operators to get last-mile connectivity for its broadband services.
Under the broadband, or so-called fibre-to-the-home business, Reliance Jio plans to provide services such as fixed (or landline) telephony, Wi-Fi connectivity, television channels, video on-demand, and video.
To do this, Reliance Jio needs fibre connectivity that reaches a large number of households.
While Reliance Jio had already laid 250,000km of fibre-optic network till June, according to Reliance Industries Ltd (RIL) chairman Mukesh Ambani’s speech at the annual general meeting on 12 June, reaching individual homes directly is a time-consuming and expensive task, said a consultant who has been consulting with the company on its broadband services.
To overcome these challenges, the company is in talks with a number of cable operators particularly in large and densely packed cities, such as Mumbai and Bangalore, added this person, who asked not to be identified. He also said Reliance Jio may also look to acquire a city-level, multi-system operator (MSO).
An MSO is a television content distributor, typically a large cable operator who, in turn, has a network of cable operators.
In June, Reliance Jio Media Pvt. Ltd, a subsidiary of Reliance Jio, won provisional approval to launch a pan-India MSO, but the company is still to set it up.
In a conversation on 16 October, on the sidelines of RIL’s earnings, a senior Reliance Jio official said all options, including acquisitions, are on the table.
“We have fibre on the ground, and now what we need is connectivity to homes. For this, we are partnering with local cable operators, multi-system operators, as they have the required infrastructure connecting the homes,” said Anshuman Thakur, head of strategy, Reliance Jio.
“The company is collaborating with local cable operators in various ways, including compensating operators for the homes they are present in, sharing revenues or profits, reimbursing their costs, or by completely buying them out,” said Thakur.
At the RIL AGM, chairman Ambani said Reliance Jio intends to connect over 1 million homes with fibre by the start of the next financial year.
“By April of next year (2016), we would have connected over 1 million homes via fibre with a capability of rapidly scaling up in the top 50 cities of India,” said Ambani in his speech.
According to Thakur, the most effective way of doing this is through local cable operators, who already have a strong presence across households.
For any company planning to enter fibre-to-the-home business, a strong relationship with the local operators is vital as it can reduce costs and the time involved in getting local-level clearances, said an expert.
“There are close to 100,000-125,000 local cable operators in the country with a fibre capacity of 20-25km under their network, which have taken them years to build,” said Sisir Pillai, chief operating officer of Lukup Media Pvt. Ltd, an Internet Protocol television (IPTV) company. IPTV is a system of delivering television content over the Internet.
“It will be difficult for any big corporate to replicate this model as it’ll involve huge capex (capital expenditure), opex (operating expenditure), time and approvals. Therefore, partnership or acquisition is the only road ahead,” said Pillai.
Pillai was earlier chief strategy officer at Digicable Network India Pvt.. Ltd, an MSO.
Getting local cable operators onboard will not be easy.
“Jio will have to offer lucrative deals to the fickle-minded local cable operators in order to entice them to switch loyalties from cable multi-system operators,” according to a 14 September report by Macquarie Research.
“Jio’s wired-access roll-out is happening alongside the 4G wireless ramp-up. However, its impact will probably be more of a two-year-horizon event, given that, on-ground, last-mile access takes time to build up critical mass,” pointed out the Macquarie report.
Reliance Jio, which was earlier expected to launch its 4G telecom and broadband services by December this year, is now looking to launch by the end of the current fiscal, the company told analysts after its latest quarterly earnings announcement.
Editor's Picks »
- Reliance Jio seen overtaking Vodafone Idea, Airtel to become India’s largest telecom firm by 2018-end
- ArcelorMittal’s Essar Steel acquisition: Who wins, who loses
- UltraTech’s dismal Q2 results darken outlook on cement sector
- NBFC liquidity crisis set to worsen real estate sector woes
- RBI pause on interest rate hike may last only till December