RComm - Reliance Jio deal has reciprocal clause

Deal to allow RCom use tower infra that Jio Infocomm will set up over the next few years

Apparently, it’s not just Rs 12,000 crore over a period of 15 years that Reliance Communications (RComm) will get from Reliance Jio Infocomm for sharing the tower infrastructure of RComm.

The deal has a reciprocal arrangement which allows Anil Ambani-led RCom to use tower infrastructure that Reliance Jio Infocomm will set up over the next few years. And, RCom will have to pay similar rental that Reliance Jio will pay for the 45,000 towers of RCom as part of the deal, according to sources.

As per the deal, RCom will get rental payment of Rs 14,814 per tower per month from Reliance Jio. This is almost half of the prevailing market rate of about Rs 30,000 per tower per month.

While Reliance Jio will share 45,000 towers of RCom, the Mukesh Ambani-led firm would require about 1-1.2 lakh towers for rolling out 4G services across the country. So, Reliance Jio will set up the remaining towers over the next two to three years. And, many of these towers would be located in tier-II and tier-III cities where RCom have less number of towers.
RCom subsidiary Reliance Infratel has more than 50,000 towers, a majority of which are linked with a fibre-optic backbone, crucial for making possible high-speed data transfer that is required for 4G. Of these, 21,000 towers are in the 330 cities where RJIL is expected to launch 4G services in the first phase.

At present, RCom covers about 60 per cent of the market with its GSM network in 14 circles. Its aim is to reach 90 per cent of the coverage area. Last month, RCom had entered into an agreement with Aircel to share about 10,000 base stations across the country to expand GSM coverage.

According to sources, RCom will share tower infrastructure with Aircel till the time Reliance Jio build its own towers.
On the other hand, this will also help RCom in getting a fair valuation of its assets as the company is in talks with MTN to offload a significant stake.