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Updated: Reliance Industries Buys 95% In BWA Auction Winner Infotel; To Invest Rs. 4800 Cr

Our BWA Auction Results coverage brought to you by One97 Communications. Lets Get Talking!

Update: DNA has a detailed perspective of a discussion that RIL held with analysts on Saturday. Some points of note:
– RIL intends to deploy WiMAX, and then graduate services to LTE when it matures in two years.
– As expected, what Reliance Infocomm did for Telecom – substantially bring down prices and make mobile ‘mass’, is what RIL plans to do in broadband – go mass, not niche.
– RIL said it paid $0.06 per user per MHz for acquiring spectrum, compared with $0.32 per user per MHz paid by 3G winners. It plans to invest Rs. 18,000-20,000 Crore over the next year to roll out services
Much more at DNA

Unexpectedly, RIL will also not look to buy, reports Financial Express. This is unexpected, and it indicates that RIL’s focus will be primarily on the data business. Remember that RIL has a distinct advantage in terms of the amount of spectrum that it has across India as well – 20 MHz; The recent TRAI recommendations have sought to limit 2G spectrum per telecom operator to 6.2MHz, and charge for spectrum over and above that; 3G spectrum has been bought for 5MHz each.

As expected, RIL will look to use passive infrastructure, including that of RCOM. Remember that most telecom companies have hived off infrastructure companies as independent units to allow infrastructure sharing. Business Standard reports that Manoj Modi, a director in Reliance Retail, will lead the dialogue for RIL, while Satish Seth, Group MD for ADAG will do so for RCOM.

Update: Looks like RCOM is trying to pitch it’s national infrastructure to BWA players, including RIL. We’ve just received the following statement from RCOM: “We welcome the entry of Reliance Industries into the high potential wireless broadband space. As leading telecom infrastructure and content service providers, we look forward to offering our services to RIL and other BWA players, even while we compete for customers in the marketplace through our choice of different technologies.”

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That was quick: Just hours after the Broadband Wireless Access spectrum auction results were announced, Reliance Industries has announced the acquisition of 95% stake in Infotel Broadband Services (P) Ltd. RIL, India’s largest private sector company, with a turnover of $44 Billion, will invest Rs. 4800 crore ($1 billion) by way of subscription to fresh equity capital at par, to be issued by Infotel Broadband. Infotel will become a subsidiary of Reliance Industries Ltd. A report in the Economic Times yesterday had suggested that this deal might take place.

Infotel is the only entity to have won pan-India spectrum across the country in India’s spectrum auctions which concluded today – It has won broadband wireless access (BWA) spectrum in all 22 circles, and no other entity, whether for 3G or BWA can lay claim to that.

The price being paid for Infotel is not yet known, but bear in mind that the company will have to pay the Indian government Rs. 12,847.77 crore ($2.74 Bn) for the spectrum across India.

This deal confirms the re-entry of Reliance Industries and Chairman Mukesh Ambani into the telecommunications space, a move which expected after a RIL renegotiated its non-compete agreement with Reliance ADA Group, which brother Anil Ambani heads. Reliance ADA Group owns Reliance Communications, which exited the BWA auction a week ago, saying that the “auction prices significantly exceeded its business case estimates.” They’re going to focus on broadband wireless through 3G-ready pan India CDMA. RCOM has 3G spectrum for 13 circles.

Yesterday, following the Economic Times story, Himachal Futuristics Communications Limited, promoted by the Nahata Group, clarified to the Bombay Stock Exchange, that it does not hold any shares of Infotel, and hence has not entered, and cannot enter into any agreement with RIL to sell stake in Infotel. Remember that HFCL promoter Mahendra Nahata was also the promoter of Jumbo Techno Services, which eventually got the license for 2G services, and then sold majority stake to Videocon. Videocon has since launched services.

Very little can be gleaned from information that Infotel submitted to the BSE, only that its ownership is 100% Indian-owned, and it has an ISP Category A license.

It’s ownership details, submitted to the Department of Telecommunications, are as follows:

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Written By

Founder @ MediaNama. TED Fellow. Asia21 Fellow @ Asia Society. Co-founder SaveTheInternet.in and Internet Freedom Foundation. Advisory board @ CyberBRICS

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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