Ambani brothers bury the hatchet, join hands for telecom biz
New Delhi: In the first business deal since they split the Ambani empire in 2005, billionaire brothers Mukesh and Anil Tuesday sewed a multi-million dollar deal where the younger sibling will share his fibre-optic network to help the other roll out his telecom venture.
The agreement will allow Reliance Jio Infocomm Ltd, a unit of Mukesh Ambani's Reliance Industries Ltd, to use younger brother Anil's countrywide network to start the fourth-generation broadband service.
The pact in future may be extended to Anil's Reliance Communications leasing out space on its 20,000 telecom towers to Reliance Jio to offer voice services along with broadband.
Reliance Communications, India's third-largest mobile telecom company, will have "reciprocal access to optic fibre infrastructure" built by Reliance Jio and the two plan to share telecommunications towers in the future, the two firms said in separate statements.
RIL, which is the only company to have 4G airwaves for all of India's 22 service areas, will pay RComm Rs 1,200 crore for using its fibre optic network to launch its services.
For the debt-laden Reliance Communications, the deal will help generate additional income from its network at a time when its profit has fallen in 13 of the last 14 quarters.
The brothers had in 2005 split the oil-to-textile empire after the death of their father Dhirubhai Ambani. Mukesh, 55, got petrochemicals, refinery and oil and gas businesses, while Anil got power, financial services and telecommunications.
The initial agreement between the brothers didn't allow them to compete directly against each other. The so-called no-compete agreement was scrapped in May 2010. In the same year, RIL bought 95 percent of Infotel Broadband, which owned frequencies to provide broadband communication services, putting it directly in competition with Reliance Communications.
Infotel Broadband is now named Reliance Jio Infocomm Ltd but hasn't yet started offering services.
Government had recently approved norms that would allow Reliance Jio to even provide mobile phone calls service using its 4G spectrum. This leaves room for Mukesh Ambani's re-entry into mobile phone services business after 2005.
Under the terms of the agreement, Reliance Jio Infocomm will utilise multiple fibre pairs across RCom's 1,20,000 kilometres inter-city fibre optic network to provide the backbone for rolling out its 4G services.
As per the agreement, RCom will in turn have reciprocal access to optic fibre infrastructure to be built by Reliance Jio Infocomm in the future.
"The agreement provides for joint working arrangements to be put in place immediately for upgradation of the optic fibre network, to ensure seamless delivery of next generation services," the joint statement by both the companies said.
Both the companies have agreed to go for comprehensive framework of business co-operation by utilising "existing and future infrastructure of both companies on reciprocal basis, including inter alia, inter-city fibre, intra-city fibre, towers and related assets."