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Mukesh Ambani's RIL Picks 95% In Infotel Broadband

14 June, 2010

Days after the estranged Ambani brothers decided to scrap the non-compete agreement, Mukesh Ambani-led Reliance Industries Limited (RIL) pitched its interest firmly in the telecom space.

RIL has entered into an agreement to acquire a substantial stake in Infotel Broadband Services (P) Ltd, owned by the son of Mahendra Nahata, managing director of Himachal Futuristic Communications Ltd (HFCL).Infotel is unconnected with HFCL, Nahata told Reuters.

RIL will invest about Rs 4,800 crore by way of subscription to fresh equity capital at par to be issued by Infotel Broadband. Post this investment, RIL will own 95% of the equity and Infotel Broadband will be a subsidiary of Reliance Industries Limited.

Infotel also emerged as a successful bidder in all the 22 circles of the auction for Broadband Wireless Access (BWA) Spectrum conducted by the DoT.

Mukesh Ambani, Chairman and Managing Director of Reliance Industries Limited said, “We see this as the next wave of value creation opportunity in the wireless broadband space. We believe this will pole-vault India’s economy into the digital world at an accelerated pace while creating next generation tools that will enhance productivity and create world-class consumer experiences.”

According to the statement, RIL sees the broadband opportunity as a new frontier of knowledge economy in which it can take a leadership position and provide India with an opportunity to be in the forefront among the countries providing world-class 4G network and services. A single 20 MHz TDD spectrum when used with LTE (Long Term Evolution) has the potential of providing greater capacity when compared to existing communication infrastructure in the country.

Reliance Communications, owned by younger brother Anil Amabni, which plans to sell up to 26% of the firm, exited the wireless broadband spectrum auction a week ago as “the auction prices significantly exceeded its business case estimates”.

According to Reuters, US chipmaker Qualcomm and India’s biggest mobile operator Bharti Airtel also won wireless broadband spectrum in some zones. New Delhi-based Infotel won spectrum in all 22 zones and will pay 128.48 billion rupees ($2.75 billion). Vodafone’s India unit, Reliance Communications and Idea Cellular, three of the country’s biggest cellular operators, did not win broadband spectrum in any of the zones in an auction that, like last month’s 3G auction, saw bids that exceeded expectations. 3G allows high-speed Internet access and data transfer on mobile phones, while broadband spectrum would provide high-speed wireless data links with better performance than fixed-line broadband.

Harit Shah of Karvy Stock Broking Limited, said, ” Total government revenues from the auction stand at Rs 385.4 billion including the payments to be made by BSNL/MTNL. In totality, the total revenues earned by the government through both the 3G and BWA auction stand at a colossal Rs 1.06 trillion, over 3x the original target of Rs 350 billion.”

India has witnessed substantial growth in the mobile subscriber base over the last decade. This provides a ready platform for offering various data services which is currently at a very nascent stage. Diverse data services and rich contents have significantly boosted data traffic in developed and other emerging markets. Data communication volume per user has been growing exponentially in the last few years, with the spread of advanced services, and a richer line-up of contents, said company statement.

According to Abbas Merchant, senior assistant vice-president, research, at Jaypee Capital Services Ltd, this is a better example for further possible consolidation in broadbrand sector. “Once the broadbrand area is crowded and bigger players enter, it would be difficult for smaller players to survive, which will cause further consolidation. Also, there would be higher growth in the sector with the entry of high end gadgets such as mobile phones with wi-max are launched in the markets.”

RIL’s initiative will usher in a wireless broadband revolution in both urban and rural areas by providing end-to-end data solutions for business enterprises, social organisations, educational and healthcare institutions and Indian consumers. This will give a fillip to rural upliftment by seamlessly connecting information and markets to the rural population on a real-time basis and will help bridge the rural-urban divide in terms of access to knowledge and information.

RIL plans to create world class state- of-the-art technology using an asset light strategy. RIL will forge several strategic relations with a host of leading global technology players, service providers, infrastructure providers, application developers, device manufacturers and others to leapfrog India to the 4G revolution.

RIL will comply with the non-compete and trademark agreements entered into at the time of corporate demerger and subsequent modifications made last month. 3G allows high-speed Internet access and data transfer on mobile phones, while broadband spectrum would provide high-speed wireless data links with better performance than fixed-line broadband.

RCOM will focus on broadband wireless through 3G-ready pan India CDMA and maximum 13 circle 3G coverage and may continue to evaluate WiMAX opportunistically on case by case basis in India and other geographies, a statement issued on Friday, said.

A Reuters report said, “India will earn Rs 38,540 crore from selling three all-India licences to six private sector operators who participated in the auction, including Aircel, plus two government carriers. Together, revenue from the two auctions will touch Rs 1.06 trillion ($22.7 billion), about three times New Dehli’s initial estimates — a welcome windfall for a deficit-strapped government, although it puts pressure on telecoms firms.”


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Mukesh Ambani's RIL Picks 95% In Infotel Broadband

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