Ambani brothers end war; redraw battle lines with Airtel, Vodafone
Mumbai, January 18:
If there was any doubt that the once warring Ambani brothers have buried the hatchet then this should settle it. The billionaires have come together yet again for a deal that will see Mukesh Ambani-backed Reliance Jio buying spectrum from Anil Ambani’s Reliance Communications across nine circles. The deal also includes spectrum sharing across 17 circles.
While the financials of deal were not disclosed, sources said RCom will get an immediate payment of ₹4,500 crore from RJio.
Rights issue announced
RJio also announced a rights issue of ₹15,000 crore. In a statement to the stock exchange, RJio said that it has issued fresh equity shares of ₹10 each to existing shareholders.
Both the companies also intend to enter into reciprocal intra-circle roaming, an arrangement which will both operators to use each other’s network resources. The two companies had earlier agreed to share each other’s tower and optical fibre cable infrastructure.
“The spectrum arrangements will result in network synergies, enhanced network capacity and optimise spectrum utilisation and capex efficiencies,” said a statement.
Access to enhanced spectrum footprint in the 800 MHz band will complement RJio’s 4G services rollout, providing increased network coverage and superior service quality, it added.
Shares in RCom closed down 3.22 per cent at ₹70.70 on a weak BSE, which ended down 1.09 per cent on Monday.
While the deal signals the end of the war between the two brothers, it sounds the bugle for a new battle in the highly competitive telecom sector. The combined strength of the Ambanis could potentially challenge the dominance of incumbent operators
RCom is already in talks with Aircel and MTS for a three-way merger and the deal with RJio paves the way for making this alliance the fourth major operator in the country.
“For RCom, this deal will allow it to further monetise its assets. The ₹4,500-crore it will receive from RJio for selling spectrum in 9 circles can be used for settling the fee demanded by the Department of Telecom in return for permitting the operator to offer both data and voice services,” said a telecom analyst on conditions of anonymity.
The DoT has demanded ₹5,384 crore from RCom for liberalising its holding in the 800-850 MHz spectrum across 16 circles. Once this spectrum is liberalised, RCom will be able to use it for all type of services, including 4G and 3G. The deal with Rjio also makes the merger with Aircel and MTS more meaningful for RCom as it will have access to more spectrum from these two operators.
Post trading with RJio, RCom’s spectrum holdings in 9 circles will come down to 1.25 MHz. But RCom’s existing services will be protected as it will be getting 3.75 MHz in the same frequency band from MTS. If the deal with Aircel goes through then RCom can do more trading deals with RJio. Already, the operator has done tower and optical fibre sharing deals with RJio.
The spectrum sharing and trading in effect makes most of RCom’s infrastructure and spectrum resources at the disposal of RJio. Access to enhanced spectrum footprint in the 800 MHz band will complement RJio’s 4Gservices rollout, providing increased network coverage and superior service quality. The spectrum arrangements between RJio and Rcom will result in network synergies, enhanced network capacity and optimise spectrum utilisation and capital expenditure efficiencies.
“This is ominous for the incumbent operators who will now have to deal with the combined Ambani power. When the two brothers split in 2005, there was a huge relief among the incumbent operators. Reliance Telecom was taking off back then and threatening to disrupt the market when the split happened. The Ambanis could still carry out that threat with RJio,” said an industry watcher.
All this is good news for consumers who will be the king once again as the operators fight out for supremacy.