How is Reliance Jio deal different for RCOM and Bharti Airtel?

In a gap of eight months Reliance Jio has signed network sharing agreements with Reliance Communications (RCOM) and Bharti Airtel. The big question is whether the agreement btween the two (RCOM and Airtel) is same in value terms or whether it is different?

In April, Reliance Jio signed deal with RCOM to share the latter’s 120,000 km optic fibre network across the country which would help the latter in providing backhaul for its yet-to-launch 4G LTE services and in return Anil Ambani’s RCom can use Reliance Jio’s yet to be built optic fibre infrastructure. The agreement provides joint working arrangement to be put in place for upgradation of the existing optic fibre network, capable of delivering next generation services like LTE. The deal was worth Rs 1,200 crore as one time indefeasible right to use.

In the month of June, Reliance Jio signed another agreement with RCOM for sharing nationwide telecom towers infrastructure. Under the terms of the agreement, Reliance Jio Infocomm will utilize upto 45,000 ground and rooftop based towers across RCOM’s nationwide network for accelerated roll-out of its 4G services.

The agreement also provided joint working arrangements to configure the scope of additional towers to be built at new locations to ensure deep penetration and seamless delivery of next generation 4G LTE services. The total value of the tower deal is more than Rs 12,000 crore during lifetime of the agreement.

Bharti Airtel deal with Reliance Jio is a comprehensive telecom infrastructure sharing arrangement under which both companies will share infrastructure created by both parties. The deal includes optic fibre network – inter and intra city, submarine cable networks, towers and internet broadband services and other such opportunities identified in the future. As part of this arrangement, Bharti and Reliance Jio have already announced an agreement under which Bharti has provided capacity on its i2i submarine cable to Reliance Jio.

The arrangement could, in future, be extended to roaming on 2G, 3G and 4G, and any other mutually benefiting areas relating to telecommunication, including but not limited to jointly laying optic fibre or other forms of infrastructure services. This means that both the companies will not jointly lay optical fiber or other forms of infrastructure services and here RCOM has an advantage having an exclusive agreement with respect to building of new towers.

Reliance Jio Deal With Respect To RCOM and Bharti Airtel    

45,000 (ground and rooftop) tower infrastructure worth Rs 12,000 crore
120,000 Km OFC network worth Rs 1,200 crore
Upgradation of existing OFC network
Configuring additional towers to be built at new locations

Bharti Deal
OFC network (inter-city and intra-city)
Submarine cable networks
Tower infrastructure
Internet broadband services
i2i submarine cable capacity

Source: TeleAnalysis

For OFC and tower, RCOM will be the primary provider whereas Bharti Airtel will be the secondary provider. Bharti Airtel will be used in areas where RCOM doesn’t have tower or OFC capacity. On the other hand, Bharti Airtel has an advantage with respect to Internet broadband services and i2i submarine cable capacity.

In order to provide customers high speed Internet connectivity, it is expected Reliance Jio in future will sign up with Tata Communications and Reliance Globalcom for submarine cable capacity closer to the launch of 4G LTE services in the country. If Reliance Jio signs submarine cable capacity with RCOM and Tata Communications, Bharti will also lose this advantage in the long run.

Being a greenfield operator, Reliance Jio has no other option but to rely on Bharti Airtel and RCOM network to built a pan India network within four-five years of bagging the license so that broadband services can kickstart at the earliest.

So, in toto, RCOM is at a higher pedestal vis-a-vis Bharti Airtel w.r.t. network sharing revenue even with the inclusion of i2i and Internet broadband services. It is difficult to predict by what percentage RCOM revenue will be higher than Bharti Airtel but industry sources say that the difference between the two is huge and RCOM is leading the current race.

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