The Reliance Communications board has approved a proposal to acquire Digicable in an all-stock deal, and for the creation of Reliance Digicom, an entity which combines RCOMs DTH, (yet to be launched) IPTV and Retail broadband operations with those of Digicable, offering Digital TV, Broadband and interestingly, according to the company, ‘Voice’. The valuation of Digicable has not been disclosed.

Digicable was established in August 2007 by Cable TV business veteran Jagjit Singh Kohli, who was previously the managing director of Zee owned WWIL. Digicable had been set up in partnership with Yogesh Shah, with whom he had previously founded another cable TV company Win Cable, which was later sold to Hathway Cable and Datacom. Kohli had also established Incablenet for the Hinduja’s.

Reliance Digicom’s business will initially begin with a combined subscriber base of 11 million homes, with claims of market leadership in 110 towns and 16% subscriber marketshare of Pay TV homes; the business will comprise of Digital TV (DTH, Cable, IPTV, HITS) with 500 digital quality and 100 HD channels, Internet on TV, 3D TV, Video on Demand and Interactive Gaming

Implications for Broadband & IPTV Business

Remember that Reliance IPTV hasn’t been launched yet, and broadband businesses usually have problems with wiring homes – building societies sometimes don’t allow service providers to lay cables to home. But with the cable operation now a part of the Reliance Digicom business, access to buildings is likely to be a little easier. At the same time, as an MSO, Reliance will have to manage as many as 10,000 local cable operators.

Having exited of the Broadband Wireless Auctions early claiming spectrum it was too expensive, RCOM will now be able to focus on its wireline infrastructure, and with DigiCable, will look offer Metro Ethernet with broadband speeds of up to 100 mbps (pipe dream?), alongwith digital cable. RCOM is also looking to offer Voice over Internet Protocol, though that couple cannibalize their existing mobile business.

Listing?

It’s not unimaginable that the ADA Group will hive off Digicom from a listing, and also take another CAPEX intensive business off RCOM’s books, into another entity. Earlier last month, the boards of RCOM, Reliance Infratel and GTL Infrastructure approved a Rs. 50,000 crore (US$ 11 billion) to set up a telecom infrastructure company, by demerging Reliance Infratel’s tower assets into GTL Infra, though retaining RCOM’s fibre optic network of over 200,000 kms and related assets with itself. It’s not clear whether these fibre optics assets will be a part of Digicomp, though.