Mumbai: Reliance Jio Infocomm Ltd (R-Jio), the telecom venture of billionaire Mukesh Ambani, has signed agreements with his brother Anil Ambani’s Reliance Communications Ltd (R-Com) to share spectrum.
The two firms said they had signed agreements “for change in spectrum allotment in 800 MHz band across nine circles from RCom to RJIL (Reliance Jio) and for sharing of spectrum in 800 MHz band across 17 circles".
“As part of the enhanced strategic collaboration, both companies also intend to enter into reciprocal intra-circle roaming arrangements," the companies said in public statements.
Financial details of the agreements were not disclosed.
According to a person close to the development, R-Com is likely to get an immediate payout of ₹ 4,500 crore from Reliance Jio and these proceeds would be used to pay the upcoming spectrum liberalisation cost. The person declined to be identified.
The arrangements are subject to liberalization of R-Com’s spectrum in the 800 MHz band and obtaining requisite approvals. Liberalized spectrum can be used for providing any service within the scope of respective service licences using any technology. “This spectrum-sharing deal of R-Com and Reliance Jio for faster 4G rollout is a win-win situation for both the companies and a kind of passive consolidation for the telecom industry," said Rohan Dhamija, partner and head of India and South Asia at consulting firm Analysys Mason.
Dhamija said sharing and trading of spectrum are going to be valuable for both companies in both revenue terms and cost related terms.
“On revenue side, R-Com will be able to have greater geographical footprint for 4G. For Reliance Jio, the company will get access to sub 1 Ghz band (800 Mhz) in additional circles, leading to a market share gain of 2-3% due to the lower band in those circles," Dhamija said.
This sharing strategy will also lead to optimal use of spectrum leading to lower network capital expenditure and thereby lower operational expenditure, he said.
The department of telecommunications has asked R-Com to pay a ₹ 5,384 crore spectrum liberalization fee before it shares spectrum. The fee would apply to 16 service circles where airwaves weren’t sold via auctions.
The person cited earlier who refused to be identified said R-Jio's spectrum trading will happen in nine circles, subsequently R-Jio and R-Com will share spectrum in 17 circles and eventually, spectrum sharing to be done in all 22 circles.
He said there will be only 17 circles in the first phase as R-Com is awaiting 800 MHz spectrum liberalization demand letter from DoT in four circles where there is no market price benchmark (Rajasthan, Kerala, Karnataka and Tamil Nadu) and in last circle, Jammu and Kashmir, there are some technical considerations which are being sorted out.
R-Jio, which is preparing to launch its 4G services, entered into a ₹ 12,000 crore pact with R-Com in June 2013 to utilize the latter’s telecom towers for providing broadband digital services. In 2014, R-Jio signed a deal with R-Com to share the latter’s optic fibre infrastructure in some 300 cities and towns.
Anil Ambani took control of R-Com in 2005 under the terms of an agreement that divided up the business empire built by their late father Dhirubhai Ambani, who died in 2002.
Reliance Industries is investing $14 billion, or around ₹ 85,000 crore, in the telecom venture.
R-Jio—which has consistently failed to meet analyst and media expectations of its commercial launch date—is primarily banking on convincing existing and potential users that its voice-over-LTE (VoLTE) network will deliver a much better voice and data service than what its competitors offer.
LTE is short for long-term evolution, a mobile telephony technology standard.