The Reliance group is planning to enter the newly-opened global mobile personal communications system (GMPCS) sector with a project which is expected to eventually cost $1 billion.
The proposed project will be implemented by group company Reliance Communications Private Ltd, a joint venture in which the Ambanis will hold 51 per cent.
The remaining equity is proposed to be offered to foreign investors, including multilateral agencies, foreign financial institutions and overseas equipment suppliers.
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The Foreign Promotion Investment Board (FIPB) will take up the project at its meeting today.
Besides satellite-based mobile telephony, Reliance will also provide other services, including data transmission and facsimile.
The foray into the GMPCS business will mark Reliance's entry into a lucrative sector.
Reliance already has a presence in the domestic telecom sector. It holds licences for providing cellular services in seven sectors and the basic service licence for Gujarat, and is seen in market circles as a potential acquirer.
Reliance is aiming to become a major player in the telecom sector, as demonstrated by the positioning of its ambitious mega GMPCS project in a market currently associated with players like Iridium, Globalstar and ICO.
Reliance plans to own a satellite to provide global mobile telephony services, making it the second Indian company after the Subhash Chandra-promoted Afro Asian Satellite Communications to do so.
The initial project cost has been estimated at Rs 4,050 crore, of which the debt component is proposed at Rs 2,700 crore.
The equity of Reliance Communications has been pegged at Rs 1,350 crore. The Ambanis will pick up equity worth Rs 690 crore for a 51 per cent stake, and issue global depository receipts (GDRs) and American depository receipts (ADRs) to raise part of the equity from overseas partners.
The size of the GDR/ADR issues is yet to be finalised. The Ambanis are in the process of finalising the equity to be offered to multilateral agencies and equipment suppliers.
The Reliance project is the largest proposed by an Indian corporate in the global mobile telephony sector.
The investment policy for the GMPCS sector, which was cleared by the cabinet recently, requires foreign equity of a project to be capped at 49 per cent.
Prospective GMPCS providers, after obtaining FIPB approval for their projects, will have to get a licence for launching their service.
The licence will be issued by an inter-ministerial committee comprising the ministries of telecommunications, home, defence and space, the last being included because of the strategic importance of the GMPCS sector.