Analysts upbeat, markets toast Reliance telecom deal

Mumbai, April 3 (IANS) Indian markets continued to toast the agreement reached Tuesday by Reliance Industries to share the optic fibre network of Reliance Communications for 4G telecom services, as analysts said it could entail more such pacts in the future.

“The door is now open. Both the group companies can now have similar arrangements in the sectors like finance, retail and entertainment,” said Kamlesh Bhatia, research director at Gartner, adding that it will augur well for both Mukesh Ambani-led Reliance Jio Infocomm as well as Anil Ambani-led Reliance Communications.

“This is positive for both. Reliance Industries can roll out services faster. It will have access to ready infrastructure. Reliance Communications, on the other hand, can monetise its infrastructure,” Bhatia told IANS.

“It will have implications for other operators as well,” he said.

“We believe that the deal is intended to be a comprehensive framework for business co-operation between the two companies,” said Edelweiss Securities, a leading financial services firm, recommending a hold on the R-Com’s shares.

“It can also pave the way for further agreements in the tower assets, which may enhance Reliance Infratel’s tenancy ratios,” the firm said about the infrastructure arm of Anil Ambani-led R-Com.

Edelweiss further said that for R-Com it will be prove to be a right step in monetising its assets and improving the balance sheet, even as the telecom industry, in general, will see in Reliance Industries a serious player with considerable muscle.

At the Bombay Stock Exchange (BSE), the shares of R-Com were up nearly 5 percent at noon Wednesday, over and above the 11 percent surge registered the day before, while those of Reliance Industries maintained the gains. The scrips shed some ground later.

In contrast, the shares of Bharti Airtel, one of the main competitors to of R-Com, were down nearly 4 percent, while those of Idea Cellular, a part of the Aditya Vikram Birla Group, closed 2.6 percent lower.

Companies run by industrialist brothers Mukesh and Anil Ambani had Tuesday announced a Rs.1,200-crore deal for cooperation in telecom business, as per which Reliance Jio will utilise R-Com’s optical fibre network for fourth generation (4G) telecom services.

R-Comm, in turn, will also have reciprocal access to optic fibre infrastructure to be built by Reliance Jio in future. Reliance Jio is a subsidiary of Reliance Industries.

The two firms signed a “definitive agreement” with Rs.1,200 crore as a one-time fee for sharing R-Com’s nationwide, inter-city fibre optic network infrastructure, adding this pact was the “first in an intended comprehensive framework of business cooperation”.

JP Morgan, otherwise not too gung-ho on R-Comm due to an over-stretched balance sheet, said that the agreement could be big positive for the company if Reliance Jio also enters into more significant agreements with it to use the tower assets.

Leading analytics firms like Ascentius Consulting felt that even for Reliance Jio, given the plans the company has in the fourth generation telecom business, the infrastructure needs will be huge and that it will not be prudent to build it from scratch.

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