From The Sip Trunking Experts

TMCNet:  Anil, Mukesh near tower-lease deal [DNA : Daily News & Analysis (India)]

[January 22, 2013]

Anil, Mukesh near tower-lease deal [DNA : Daily News & Analysis (India)]

(DNA : Daily News & Analysis (India) Via Acquire Media NewsEdge) After cleaning out 20 million inactive subscribers in September, Reliance Communications (RCom), India's fifth-largest telecom operator, seems to be doing more to rebound.

The Anil Ambani firm's Act II was to go capex-thin by outsourcing managed services to French giant Alcatel Lucent.

The third coming up is with elder brother Mukesh's Reliance Infotel to lease its telecom towers.

The deal is expected to be a win-win for both - RIL gets the much-needed infrastructure on the ground at a cheaper cost than setting up its own, while RCom gets to clean up its debt-riddled balance sheet by hundreds of crores per year.

Each telco/tenant putting up its base station on a telecom tower pays around Rs35,000 per month as rent. RCom owns around 50,000 towers and has an average 1.74 tenants per tower - which is the so-called tenancy ratio.

After the RIL deal, this ratio is expected to be boosted, delivering extra cash to the beleaguered firm.

An RIL spokesperson declined to comment. An RCom spokesperson called it 'speculation'.

Deepti Chaturvedi, analyst with CLSA Asia-Pacific Markets, said an infra-sharing deal with RIL is 'inevitable'.

Such incremental tenancies will improve RCom's financial health, adding 10-15% to its operating profit next fiscal, she said in a note on Monday.

Rcom had debt of Rs36,700 crore as of September 30, 2012. The company was hoping to pare it by selling shares worth Rs7,000 crore in Flag Telecom in Singapore, but the float fell through due to poor market conditions.

At the RCom annual general meeting last year, chairman Anil Ambani had said the company will take up Flag listing again in 2013.

Meantime, the company, which signed a $100 billion, eight-year managed-services contract with Alcatel-Lucent for the south and eastern regions of the country, is set to do another outsourcing deal, sources said.

RCom would reap the benefits of shifting from a capital expenditure-heavy business model to an operational expenditure - or opex - model in years to come, analyst said.

Earlier, the company had a joint venture with Alcatel Lucent to manage just the wireless business. This was dissolved and the new deal was struck.

One vendor looking after the data network, instead of many, fits very well with RCom's shift in strategy from voice to data and from prepaid to postpaid.

This second deal is expected in the first half of February, sources said.


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