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How Picking Up Stakes In Cable Operators Will Benefit RIL

Mukesh Ambani’s Reliance Industries is reportedly in talks with major cable operators, including MSOs (Multi-System Operators) such as Hathway, Den, Digicable and InCable to pick up a minimum 26% stake, according to Business Standard. According to the report, RIL wants to rope in cable service providers as last mile connectivity partners for its forthcoming 4G internet services. The report cites two independent sources to confirm the development. It also quotes an RIL spokesperson who reveals that the company has been in talks with several potential partners to roll out the service with a partnered approach, making use of its own and its partners’ assets. However, the spokesperson did not get into specifics.

How Will RIL Benefit?

– Easy Reach:  Partnering cable operators and MSOs will help RIL in setting up a large distribution network for its 4G internet services at the local level. Since, the majority of the market is still connected via Cable networks, they would have a better reach. It would allow RIL to leverage the operators’ network for sales, support and service, and RIL would not need a major investment in building up a retail presence.

– Triple play: Also, operators like Hathway offer their own internet service, while some local operators offer these services via franchise agreements with partners such as Sify. RIL will also give these operators the incentive of offering high speed internet services, which are much more superior to the operators’ existing offerings and compete with other ISPs. The promise of triple play integrating internet, voice and tv, which Broadband providers have not been able to so far successfully offer to a wider audience, might be pitched through cable networks.

– Content: As far as content is concerned, the investments will allow RIL to offer the operators’ local content, and there might even be local ad partnerships through the network. Since internet has the potential to offer interactivity, local services such as classifieds, can be integrated in an interesting manner. But we don’t think that content would play a major role in the tie-up. RIL has already done a deal with Network18 through which it gets preferential access to the group’s web and television properties.

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– Fiber Infra?: As the report points out, the large operators have a good fiber optic infrastructure which can be leveraged by RIL. Although last mile delivery would not be through a wired network, since RIL’s internet license allows it to offer access through wireless and it’s also reportedly investing 4G enabled internet devices such as tablets. But it would definitely help connecting network equipment through inter and intra city fiber network. RIL is already rumored to be in talks with R-COM to use its fiber network and towers.

Cable operators in turn will benefit from investments, since they need to further invest in digital infrastructure to meet the 2012 target set for digitization in metros and 2014 target for total digitization. As we pointed out earlier, this will definitely lead to more ISPs and cable networks joining forces.

The Lowdown: The RIL – Network18 Deal
RIL To Offer 4G Internet Services At Rs10/GB; Tablets At Rs 3,500: Report; Our Take
RIL To Partner With RCOM For Network, Voice Services: Report
The Next Generation: Reliance’s Plans To Ram India’s Sluggish Broadband Sector

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