Ambani brothers join hands for telecom biz

Billionaire Ambani brothers on Tuesday struck a Rs 1,200-crore (Rs 12-billion) deal wherein Mukesh will use his younger sibling's optic fibre network for launch of his telecom venture.

Under the pact, Mukesh Ambani-led Reliance Industries' telecom arm will hire nationwide optical fibre network of Reliance Communications for the roll-out of 4G services.

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"Reliance Jio Infocomm Ltd and Reliance Communications Ltd on Tuesday announced the signing of a definitive agreement for approximately Rs 1,200 crore (Rs 12 billion) as one-time indefeasible right to use fees for sharing RCom's nationwide inter-city fibre optic network infrastructure," RCom said in a statement.

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.

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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 statement said.

This agreement is the first in an intended comprehensive framework of business co-operation between Reliance Jio Infocomm and RCom to provide for optimal utilisation of the existing and future infrastructure of both companies on reciprocal basis, including inter alia, inter-city fibre, intra-city fiber, towers and related assets.

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Reliance Jio Infocomm, formerly Infotel Broadband, won 4G spectrum for pan-India services in 2010, but the company is yet to launch its services.

Government recently approved norms that would allow RJI 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 following Anil Ambani moving out with RCom, formerly Reliance Infocomm, Reliance Energy and Reliance Capital.

The agreement provides relief to RCom which reported net debt of around Rs 37,360 crore (Rs 373.6 billion) as on December 31, 2012.

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The deal paves the way for further sharing of infrastructure between the two firms as the agreement talks about 'optimal utilisation of existing and future infrastructure of both companies on reciprocal basis, including inter alia, inter-city fibre, intra-city fibre, towers and related assets.'

RCom has been looking to sell stake in its tower firm Reliance Infrastructure but has not zeroed in on to any of the proposals.

The company has also held discussion with various firms to lower its stake in under-sea cable firm Globalcom.