Mukesh Ambani's Reliance Industries Ltd (RIL) to enter India's Telecom sector with $5 billion investment

Reliance Industries Limited (RIL) plans to enter the Indian telecoms market with an investment of around $5 billion. The Mukesh Ambani led group said it is open to sharing his younger Brother’s group, Reliance Communications’ (Rcom) infrastructure for the investment. RIL said it would invest around $1 billion for rolling out broadband services to enable the company achieve its target of 100 million subscribers through its other recent acquisition, Infotel, in a five year period.


For Infotel, RIL made an investment of Rs 4,800 crore, emerging as the only company to have effectively bid for all India spectrums at the end of a 16-day auction conducted by the government last Friday. As such, the recent acquisition of Infotel requires RIL to submit about Rs 12,827 crore to the government as the licence fee for spectrum acquired by Infotel, expected to now form a part of the Group’s flagship company as a subsidiary.


However, the company was not forthcoming on partnering with Rcom for infrastructure that includes optic fibre and towers; rather, RIL said it could share broadband infrastructure with any of the existing players. The company’s CEO, Mr. Modi, said RIL does not intend to acquire any 2G telecom company for voice telephony, ending speculation over its suspected interest in Videocon Mobile, a Venugopal Dhoot group company with licences for 22 circles obtained in 2008.


Even so, RCom, India’s second biggest telecoms company won the highest number of circles together with Bharti Airtel for the 3G license auction that ended recently. According to RIL officials, the overall estimated cost of the investments, including the recent 95% stake Infotel acquisition, will be an estimated Rs 22,000 crore with the aim being to rapidly improve and popularize broadband services at an affordable price.


Moreover, the company said it would make arrangements with current players in the industry to ensure that users of devices such as notepads and laptops enjoy the full services. RIL’s last week’s entry into the telecoms market in India comes after a long time of restrictions, and started with its Rs. 4,800 crore acquisition of Infotel. The investment became possible after the two Ambani brothers agreed to a truce scrapping a non-compete agreement to allow each other business flexibility. The company claims that no other private operators have enough spectrum assets that can match its pan-India 20 MHz BWA spectrum capacity. Further, RIL reiterated yesterday that it had competitive edge over others given its significantly high data speed compared to 2G and 3G networks.


June 16, 2010.