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Reliance Jio secures $750M from Korea Exim Bank to buy goods & services from Samsung

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Reliance Industries’s data services venture Reliance Jio Infocomm Limited (RJIL) has secured a $750 million loan backed by Korea Exim Bank and guaranteed by Reliance Industries (RIL).

The company mentions that this loan will be primarily used to finance goods and services procured from Samsung Electronics for rolling out the infrastructure of RJIL.

While the company hasn’t disclosed any specific details on what goods and services it is procuring from Samsung, we’re reminded of a source-based DNA report from December last year that had suggested that Reliance Jio had signed a deal with Samsung to procure BTS (Base Transceiver Station) infrastructure for its 4G rollout. Reliance Jio had reportedly signed a contract worth around $1.2 billion (Rs 7,500 crore) with the Korean company for supplying 70,000 BTS across India, of which 14,000 BTS (around 20%) had already been supplied.

Reliance Industries was also earlier rumored to be in talks with Samsung to buy LTE handsets, but apparently that deal fell through over pricing issues, as Reliance Jio Infocomm wanted the handsets to be priced at Rs 5,500 while Samsung refused to go below Rs 8,500 along with a commitment that Reliance purchase 3 million handsets from them.

Who is funding this loan?

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Of the $750 million, Korea Exim Bank is funding $440 million as direct funding and the remaining $310 million will be through a Korea Exim Bank covered guarantee by 11 banks that include The Hongkong and Shanghai Banking Corporation Limited, Australia and New Zealand Banking Group Limited, Banco Santander, S.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., BNP Paribas, Crédit Agricole Corporate and Investment Bank, Commerzbank AG, ING Bank, JPMorgan Chase Bank, N.A., Mizuho Bank, Ltd, and Sumitomo Mitsui Banking Corporation and a new relationship NongHyup Bank.

RIL mentions that this loan has total debt repayment period of 12 years which includes a 2 year availability period and repayable over 10 years thereafter. It claims that this is the Korea Exim Bank’s largest telecom infrastructure financing till date and the bank’s largest deal in India.

Recent Reliance Jio developments

While Reliance Jio is yet to launch its 4G service, the company has been signing a new tower sharing deal with a new company almost every month, the most recent one being with Indus Towers (a threeway joint venture between Airtel, Vodafone and Idea).

In May this year, Reliance Industries had mentioned that it has rolled out free Wi-Fi hotspots in eight locations at Ahmedabad and nine locations at Baroda and Surat. It had also mentioned plans of rolling-out high speed internet services via optical fibre (FTTX) in over 900 cities/towns in the country.

In the following month, Reliance Industries chairman and CEO Mukesh Ambani had informed that they would launching its data services in a phased manner across India in 2015, after conducting expanded trials which was expected to launch in July and continue through the end of 2014 and early 2015.

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It’s worth noting that BWA rollout obligations also kicks in by mid-2015, as per which all BWA licensees have to provide street level coverage in at least 90% of the metro service areas and at least 50% of the rural short distance changing areas (SDCAs), failing which the BWA spectrum provided will be withdrawn.

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