Ambani brothers join hands for Rs 12 billion telecom deal

by CXOtoday News Desk    Apr 03, 2013

reliance

The year 2013 is expected to be crucial for the Indian telecom sector as far as broadband Internet services are concerned with telcos coming up with innovative services and striking new deals. In a recent landmark development, two powerful business tycoons and brothers Mukesh and Anil Ambani  join hands to announce a-Rs 12 billion pact to share a fiber-optic network.

According to company statement, Reliance Jio Infocomm Ltd., a unit of Mukesh Ambani’s Reliance Industries Ltd., will use the countrywide network Reliance Communications Ltd. of Anil Ambani to start a fourth-generation (4G) broadband service, 120,000 km fibre optic network to roll out the country’s first pan-India 4G services later this year.

Under the terms of the deal, Reliance Communications will, in turn, have reciprocal access to the optic fibre infrastructure network that Reliance Jio builds in the future. However, according to sources, the deal is not only confined to a comfortable leasing arrangement of each other’s networks. It also provides for “joint working arrangements” to upgrade their optic fibre networks.

Reliance Industries, India’s largest private sector company in the country and has a 95 per cent stake in Reliance Jio (formerly known as Infotel Broadband). Infotel Broadband had paid Rs 48 billion for broadband wireless access spectrum that the government auctioned in May 2010.

It is common for telecom companies to use each other’s network as it saves on the cost of duplicating infrastructure. But this is the first of its kind for the two brothers and analysts expect many more significant telecom deals to happen this year.

While the response to 4G has not been very exciting until now, the pact signed by the Ambanis is likely to usher some new hopes in this area. Experts believe with increased connectivity and the advent of 4G, India’s digital space will undergo a radical change. It will give a fillip to several industries and improve healthcare services, education and entertainment, while decreasing the cost of such services due to convergence.

Moreover the Indian government is also taking proactive steps to increase the reach of broadband across the country from the current 20 million users to 600 million users by 2020.