India's once-feuding billionaire Ambani brothers signed a long-expected pact for their rival telecom firms to share mobile masts in a contract valued at more than $2 billion over several years. The deal marks another step towards cementing a reconciliation in the once-warring family. Reliance Industries Ltd, controlled by India's richest man, Mukesh Ambani, will lease up to 45,000 mobile masts from mobile carrier Reliance Communications Ltd in a deal valued at more than Rs. 12,000 crore over the lifetime of the contract, the companies said on Friday.
Reliance Jio Infocomm, a unit of Reliance Industries, plans to roll out a nationwide 4G network. The company won airwaves in 2010, but is yet to start commercial services. Reliance Jio said the tower deal will help "accelerated roll-out" of its planned 4G services. A Reliance Industries spokesman said the long-term contract has no fixed length.
The deal is a boost for Reliance Communications, controlled by Mukesh's younger brother, Anil Ambani. Reliance Communications is India's third-biggest cellular carrier by customers but profits have been under pressure, mainly due to its heavy debt burden.
"This is going to be a positive for Reliance Communications as it opens a new source of revenue for them," said K.K. Mital, head of portfolio management at Globe Capital Market. "It's also good for Reliance Jio because they are getting ready infrastructure and the big benefit is there is no upfront investment in building infrastructure."
The tower deal comes after an agreement in April to lease Reliance Communications' optic fiber network to Reliance Jio, in what was the first business tie-up between the two billionaire brothers since ending a long-running feud. Dhirubhai Ambani's death in 2002 led to a power struggle between his two sons that split the Reliance empire. Mukesh ended up with the core energy business, and Anil ended up with the telecom, financial services and power businesses.
Shares in Reliance Communications were trading down 0.6 per cent at 11.37 a.m., after rising to a year-high of Rs. 119.90 ahead of the announcement. The stock has more than doubled since April on hopes of more pacts with Reliance Industries. Reliance Industries, India's fourth-largest company by market value, has been under pressure from investors worried by its slowing natural gas business and its drive into consumer sectors such as telecom and retail.
Its telecom unit Reliance Jio has also signed a pact with Indian mobile market leader Bharti Airtel for leasing international bandwidth. It has also joined a consortium of telecom companies building a submarine cable system to link Malaysia and Singapore with the Middle East. On Thursday, Mukesh Ambani told shareholders at the company's annual general meeting that he had a bullish view of the potential for digital services in India, and the Reliance Jio unit would more than triple its headcount to 10,000 over the next year, but did not say when services will be launched.
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