Mega deal between Ambani brothers gets thumbs up from the industry

While the two companies did not disclose the deal size, banking sources pegged the transaction value at Rs 24,000- 25,000 crore

Mukesh Ambani-promoted Reliance Jio's decision to acquire spectrum, tower and other wireless assets of beleaguered Reliance Communications on Thursday got a thumbs up from the industry.

Industry body Cellular Operators' Association of India (COAI) Director General Rajan Mathews told PTI that the deal is "good for the industry".

"It is good for the industry because the industry continues to consolidate around serious players who have deep pockets and financial where-with-all to play effectively and delivery value to customers in future," Mathews said.

On the 85th birth anniversary of father Dhirubhai Ambani, Mukesh Ambani, India's richest businessman on Thursday stepped in to bail out younger brother Anil Ambani's debt-ridden Reliance Communications by acquiring spectrum, tower, optical fiber network and other wireless assets in a deal that banking sources say is worth Rs 24,000-25,000 crore.

The two companies, however, have not disclosed the size of the transaction.

The deal can be seen as homecoming-of-sorts for RCom, then Reliance Infocomm, was launched under leadership of Mukesh Ambani in December 2002 with tag line of 'Kar lo duniya mutthi mein' to offer cheapest mobile call rates.

However, RIL's first mobile venture went under the control of Anil Ambani in 2005 as part of settlement deal between the two brothers when they parted ways.

Incidentally, Anil Ambani in September last year had said that Jio and RCom have "virtually" merged. The two companies had signed their first telecom deal in 2013.

A statement by Jio -- which has 160 million customers just over a year into 4G operations -- today said the assets covered under the latest deal are strategic in nature and expected to contribute significantly to its large scale roll out of Wireless and Fiber-to-Home and Enterprise services.

RCom said the deal packs in 122.4 MHz of 4G Spectrum in the 800/900/1800/2100 MHz bands, over 43,000 towers, 1,78,000 kilometres of fiber and 248 media convergence nodes.

The announcement comes just two days after Reliance Communications disclosed a new deal with the lenders under which nearly Rs 40,000 crore will be raised through sale of assets, averting an imminent takeover by the 35 local and foreign banks.

RCom has shut down its mobile phone calls business last month as it was not in position to afford operational expenses for the loss making business. However, RCom has announced that it will continue to offer services to business organisations.

The latest deal will bring immediate relief to RCom, which is reeling under Rs 45,000 crore debt, and the company hopes to use the entire proceeds to pare its liabilities.

COAI's Mathews said that the "good news is that the existing assets will be utilised by a serious player".

"Network roll-out, increasing rural penetration, new technologies like 5G, and improving customer experience requires substantial investments to be made. A serious players can attract those investments," he added.