India's Reliance Communications has struck a key partnership and is set to offload a major asset as it revamps its portfolio

April 9, 2013

3 Min Read
Reliance Revamps Its Telco Assets

Reliance Communications, one of India's largest telcos, is making headlines as its management team refocuses its operations with some much-needed M&A activity and renewed family connection.The M&A activity revolves around Reliance Globalcom, the operator's international transport network division that was formed following a series of acquisitions, most notably of global subsea giant FLAG Telecom, Ethernet services player Yipes Enterprise Services and managed VPN service provider Vanco. (See Reliance Unit Targets 'Complacent' Giants.)Reliance, the third-largest mobile operator in India with 118 million customers, has been trying to offload Globalcom for some time to help reduce its debt pile, which stood at 373 billion Indian Rupees (US$6.84 billion) at the end of 2012. Now, finally, it may be close to a deal. Reports in India's media suggest a consortium headed by Middle East carrier Batelco Group will pay INR60 billion ($1.1 billion) for an 80 percent stake in Globalcom. (See this Times of India article for more details.)Reliance issued a statement in mid-March admitting it was in talks with Batelco: Now a deal is expected to be finalized in the coming weeks.In addition, Reliance Communications is also set to sell its direct-to-home satellite TV business, Reliance Big TV, for INR20 billion ($367 million).Brother, can you lend a hand?
Selling assets isn't the only way Reliance Communications is boosting its finances. It also just struck a INR12 billion ($220 million) deal to share its national fiber backbone network with Reliance Jio Infocomm (formerly Infotel Broadband), the startup operator that is the only company to hold 4G licenses for all of India's 22 "circles" (telecom service areas).The ties between the two companies are close: Reliance Jio Infocomm is part of Reliance Industries Ltd. (RIL), which is run by Mukesh Ambani, while Reliance Communications is run by his brother, Anil Ambani. (See The Return Of Ambani Brothers.)The siblings have not always been the best of friends, but ended a long-running feud in 2010 when Mukesh bought his way into India's emerging 4G market. (See Oh Brother!)But what Mukesh acquired was a set of valuable licenses without any infrastructure, so he was building a 4G operator from scratch. It seemed likely that the startup would seek wholesale deals for its long distance and metro transport (it appears to be building out its own backhaul capacity) and rent mobile tower space from the handful of wireless mast aggregators in India. That would still leave it plenty to do in building its own radio access network (its 4G services are based on the LTE TDD standard) and Service Provider Information Technology (SPIT) systems ahead of its service launch, which is expected by the second half of 2013.And that's how it seems to be playing out. Reliance Jio Infocomm looks likely to lease mobile tower assets from Reliance Communications subsidiary Reliance Infratel, a deal that would generate additional new revenues for Anil Ambani's company. And while the startup operator has been coy about its RAN supplier details -- Samsung Corp. is believed to have landed the initial deals -- it has reportedly turned to a variety of vendors, including Amdocs Ltd., Hewlett-Packard Co., IBM Corp., Microsoft Corp., SAP AG and Subex Ltd., for its key OSS and BSS capabilities.But can the brothers keep their truce? After all, Reliance Communications has mobile broadband services of its own courtesy of its 3G licenses. One company hoping the renewed brotherly love won't last is India's mobile market leader and the only operator to have launched 4G services to date, Bharti Airtel, which stands to come under the greatest competitive pressure if the Ambani brothers build on their new cooperative foundations.— Ray Le Maistre, Editor-in-Chief, Light Reading

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