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| RIL pegs investment for telecom entry at $5 bn |
| Press Trust of India / New Delhi Jun 13, 2010, 15:21 IST |
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Mukesh Ambani-led Reliance Industries' (RIL) foray into the telecom sector will entail an investment of about $5 billion, for which it is open to sharing infrastructure of younger brother Anil's group firm Reliance Communications (RCom), company officials said.
The flagship firm of Ambani, who is known for making ultra-mega projects, would invest about a billion dollars for rolling out broadband services to attain a target of 100 million subscribers through the just acquired Infotel in five years, RIL top officials told analysts last night.
RIL acquired Infotel for Rs 4,800 crore on the day the Nahata group firm emerged as the sole player to have bid successfully for all-India spectrum at the end of the 16-day-long auction conducted by the government on Friday.
Apart from this, the cash-rich RIL will have to pay Rs 12,872 crore to the government as the licence fee for spectrum bagged by Infotel, which would become the subsidiary of the Mukesh Ambani group's flagship company.
Asked if it could tie up with Anil Ambani-led RCom for infrastructure, including optic fibre and towers, RIL top executive Manoj Modi and Chief Financial Officer Alok Agarwal said that broadband infrastructure could be shared with any of the existing players.
Replying to a specific query on whether RIL also intends to acquire any 2G telecom player for voice telephony, Modi said: "RIL will not acquire any 2G player", thus ending speculation about the company's interest in Videocon Mobile, a Venugopal Dhoot group firm that acquired licences for 22 circles in 2008.
Incidentally, the second largest largest telecom player, RCom, bagged the highest number of circles along with Bharti Airtel for the 3G license auction, which concluded recently.
The officials said the total investment, including the acquisition of a 95 per cent stake in Infotel, which would be a subsidiary of RIL, would come to around Rs 22,000 crore and the endeavour would be to revolutionise and popularise broadband services at an affordable price.
Mukesh, along with Manoj Modi, had created Reliance Communications, but the company -- now known as RCom -- had gone to Anil Ambani as part of the family settlement to divide the Reliance Empire.
The officials told analysts that even for devices like notepads and laptops, arrangements would be made with existing players to ensure that customers get the full services.
Last week, RIL entered the telecom arena, hitherto forbidden to it, by announcing the Rs 4,800 crore acquisition of Infotel, promoted by the Mahendra Nahata group.
The deal followed a truce arrived at between Mukesh and his younger brother, Anil, on May 23, wherein the warring brothers scrapped a non-compete agreement to allow each other business flexibility.
RIL yesterday claimed that none of the other private operators has enough spectrum assets to match its capacity.
"None of the private operators has spectrum assets that would match the capacity of pan-India 20 MHz BWA spectrum," RIL said today.
In a presentation to analysts, RIL said that wireless broadband would be the new frontier in this space and it was well placed to exploit this opportunity with the 20 MHz of BWA spectrum it got through the Infotel acquisition.
RIL also said that it has the "decisive competitive edge due to significantly high data speed compared to 2G and 3G networks".
RIL is the largest profit-making private company in the country, clocking a net of Rs 16,236 crore in 2009-10, and has a net worth of Rs 137,171 crore, with Chairman Mukesh Ambani known for creating large capacities as his business model.
The company had cash and cash-equivalent of Rs 21,874 crore as on March 31, 2010.
At the time of acquiring Infotel, RIL Chief Mukesh Ambani said: "We see this as a 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."
RIL said the BWA spectrum has been acquired at a much cheaper price compared to 3G radio waves, but the BWA spectrum asset would be much more useful in terms of growth potential and further expansion.
RIL said the pan-Indian cost (in $/MHz/population) of BWA spectrum was 0.06 against 0.32 for 3G.
Besides, the BWA spectrum acquisition price was extremely competitive by global benchmarks also, it added.
It also claimed that 3G spectrum "holders will remain inherently disadvantaged for data services, even if they deploy LTE (a new generation technology that enhances the performance of telephony and data services)" and the BWA spectrum would give "utilisable bandwidth which is more than double" of the 3G spectrum.
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