NEW DELHI: In a move that could lower call and broadband charges, Mukesh Ambani’s Reliance Jio and Sunil Mittal’s Bharti Airtel have joined hands to use their telecom infrastructure, marking a complete shift from the situation a decade ago when the two were in warring camps.
Under the arrangement, announced a day after Ambani and Mittal hinted at a possible tieup, Reliance Jio can access Bharti’s countrywide tower and optic fibre network. This will help it launch various services faster. Reliance will pay to use Bharti’s infrastructure, which would give the debt-laden Bharti much needed cash.
Bharti, in turn, can ride Reliance’s 4G network to offer roaming facilities to users. While Reliance Jio has a pan-India licence for 4G services, Bharti has permits only for eight circles. Besides, Bharti will also be able to use the telecom infrastructure that Reliance sets up.
However, the deal puts a question mark on Reliance Jio’s inter-city optic fibre and tower sharing deal with Anil Ambani’s Reliance Communication (RCom). A wider agreement between Bharti and Reliance Jio may prevent further cooperation between the Ambani brothers and restrict the potential benefits to RCom, which was counting on the deal with Reliance Jio to bolster its bottomline. RCom refused to comment.
In a joint statement on Tuesday, Bharti and Reliance said they would look at “other such opportunities” identified in the future. The arrangement could, in future, be extended to roaming on 2G, 3G and 4G, and “any other mutually benefiting areas relating to telecommunication, including but not limited to jointly laying optic fibre or other forms of infrastructure services.”
“The cooperation is aimed at avoiding duplication of infrastructure, wherever possible, and to preserve capital and the environment. This will also provide redundancy in order to ensure seamless services to customers of the respective parties,” the companies said.
Industry analysts said the move would be mutually beneficial for both Bharti — India’s largest mobile operator, which is saddled with a pile of debt due to its Africa buyout — as well as Reliance Jio, the new kid on the block which will get ready infrastructure to roll out services quickly.
“It is a win-win situation for both the companies as existing infrastructure gets better utilised. Reliance Jio does not need to spend money on re-creating infrastructure as it can ride on Bharti’s set-up. On the other hand, Bharti will get more cash inflow from its existing assets which will help them compete more freely in the market,” said Prashant Singhal, who tracks the telecom sector at Ernst & Young India.
A telecom industry veteran, speaking on condition of anonymity, said the agreement has the potential to disrupt the current market dynamics and could make things difficult for other telecom players in the market such as British giant Vodafone, Kumar Mangalam Birla’s Idea and RCom. “It will create huge economies of scale for these two companies and their infrastructure costs also drop due to sharing. They will be able to provide much lower tariffs, which may have a bearing on the business operations of other players,” the analyst said.
Some analysts said the lower operating costs may even prompt Mukesh to offer dirt-cheap tariffs on broadband — similar to what he did during his initial foray into the telecom space in 2003 at rates which changed the market dynamics at that time. The business, now operating under RCom, later went to Anil as part of a family settlement.
So what is on offer through the new agreement? Bharti has about 85,000 towers spread across the country, including its proportionate share in Indus Towers — a JV between Bharti, Vodafone and Idea. Bharti also has a pan-India optic fibre cable network of 1.75 lakh route kms and a global network that runs across 2.25 lakh route kms, covering 50 countries across five continents.
This includes ownership of i2i submarine cable system connecting Chennai to Singapore as well as consortium ownership of SMW4 submarine cable system connecting Chennai and Mumbai to Singapore and Europe. Bharti and Reliance Jio are already in an agreement under which Bharti had provided capacity on its i2i submarine cable to Reliance Jio.
Reliance Jio holds a Unified License and is the only pan-India operator with Broadband Wireless Access (BWA) spectrum capable of offering the high-speed 4G LTE wireless services. It is also setting up a pan-India telecom infrastructure to provide high speed internet and communication services.