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Reliance Jio signs deal to buy RCom’s wireless assets

While we were away…

The Mukesh Ambani-led Reliance Jio announced it will buy the wireless infrastructure assets that include towers, optic fibre cable network, spectrum, and media convergence nodes (MCNs)* of Reliance Communications (RCom) and its affiliates in an all-cash deal. The debt-ridden RCom is owned and run by the younger Ambani sibling, Anil.

In an acquisition transaction related to one listed company buying another, it’s strange that no acquisition price has been publicly disclosed to shareholders. Transparency, anyone? However, The Economic Times says, not naming any sources, that the deal is pegged at Rs 24,000 crores.

A press statement from RCom mentions that after the purchase Jio will gain over 178,000 kilometres of optic fiber, more than 43,000 cellphone towers and 122.4 MHz of 4G Spectrum in the 800/900/1800/2100 MHz bands.

The newly acquired assets are “strategic in nature and expected to contribute significantly to the large-scale rollout of wireless and fibre-to-home services by the company,” the statement from Reliance Jio said.

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What about subscribers

According to data released by TRAI in October 2017, Reliance Jio had more than 120 million active subscribers and the number for RCom was over 46 million.

But on October 31st a directive from TRAI said that RCom “shall provide only 4G data services to its customers and as a result will discontinue to provide voice services to the subscribers, with effect from December 1, 2017.” The regulator had directed RCom to not reject any porting out request of its subscribers and asked all telecom operators to accept request of RCom subscribers till December 31, 2017.

This would suggest that Reliance Jio will not be adding the entire 46 million large subscriber base to its network.

What is being said about the deal

  • A report on the Economic Times speculates that this deal could be the first step by the Ambani brothers towards consolidation of their father’s business. It goes on to point out that the timing of the deal was set to happen on the birth anniversary of Dhirubhai Ambani.
  • In a statement to BloombergQuint Prashant Singhal of the consultancy firm EY India said that if the deal in the Rs25,000 crore ballpark it’ll help RCom cut down a lot of its debts and not require any write-offs from lenders.
  • But global financial services major Morgan Stanley mentioned that the deal may raise Jio’s parent company RIL’s net debt 10-12% in the near term.

*Note: We are not sure what a Media Convergence Node is and we have reached out to RCom for a comment. We will update the story when we hear from them.

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Writes about consumer technology, social media, digital services and tech policy. Is a gadget freak, gamer and Star Wars nerd.

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