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When asked whether Reliance Communications (RCOM) views Reliance Jio as a partner or a competitor during the company’s Q3-FY14 earnings conference call, RCOM CEO (Wireless) Gurdeep Singh said that “there is a partnership and there is a competition” with Reliance Jio, however the go‐to‐market of both the companies remains completely separate.
Singh said the Reliance Jio partnership allows the company to monetize their assets as well as lower their capex only to the electronics part in the future, since they have a reciprocity arrangement with Reliance Jio. This arrangement will provide them access to all infrastructure (fibres and towers) being laid out by Reliance Jio, at the same terms and conditions which RCOM had given earlier. For the electronics part of the capex, RCOM has an open line with the China Development Bank. Singh claims this arrangement will significantly fasten RCOM’s expansion plans in the country.
Remember that RCOM had inked a Rs 1,200 crore fibre optic network infrastructure sharing deal with Reliance Industry’s data services venture Reliance Jio in April 2013, after months of speculation on whether the two entities were going to partner or not. This was about three years after Mukesh Ambani’s Reliance Industries (RIL) and Anil Ambani’s Reliance Group had scrapped all its non-compete agreements signed at the time of Reliance Group’s split in 2006.
As part of the agreement, Reliance Jio Infocomm was allowed to make use of multiple fiber pairs across RCOM’s 1,20,000 KM inter-city fiber optic network to provide 4G services while RCOM would get access to the optic fiber infrastructure being built by Reliance Jio Infocomm.
This agreement was followed up with a bigger tower sharing deal worth Rs 12,000 crore in June 2013, as part of which Reliance Jio Infocomm leased RCOM’s 45,000 ground and rooftop based towers for its 4G services as well as create joint working arrangements to configure additional towers to be built at new locations.
Singh says the Intercity fibre sharing process is still going on and about 50% of tower deliveries have already been made with the rest underway. The company believes it will be able to deliver most of the requisite tower and fiber infrastructure to Reliance Jio in the next 3-4 months. The revenue starts kicking in for RCOM after Reliance Jio installs the equipment and does the necessary testing, subsequent to which it will apparently share details on revenues and its realization.
Intra-city Cable Sharing Network agreement: In June 2013, RCOM CEO (Wireless) Gurdeep Singh had said that it was in talks for a third deal with Reliance Jio Infocomm to share optic fibre in cities and the deal was expected to be announced by December 2013.
However, Singh says the agreement is still in negotiation and will be announced at the appropriate time. However, it expects to finalize all its agreements with Reliance Jio in the next 2-3 months. Singh also hinted that they are currently in negotiations with other telcos for similar agreements.
Our Reliance Communications Q3-FY14 Earnings Coverage
– Reliance Communications Renewing Focus On Its CDMA Services
– RCOM extends its EMI-like device tie-ups to Lumia & HTC Devices; Plans for more
– Reliance Communications Had 11.1M 3G, 36.2M Mobile Internet Connections At End Of Q3-FY14
– RCOM Non-Voice Revenues Flat For Q3-FY14