Reliance Jio Infocomm (Jio), a subsidiary of Reliance Industries, on Thursday said it was buying a clutch of wireless assets from Reliance Communications (RCom) including wireless spectrum, tower, fibre and media convergence nodes (MCNs). While Jio has been using the 800 MHz spectrum as well as the optic fibre as per an arrangement with RCom, the spectrum in the 900 MHz and 1800 MHz bands will be a bonus. Had RCom surrendered the spectrum to the department of telecommunications (DoT), Jio would have needed to buy it at an auction, which is why, analysts point out, the transaction makes sense. Analysts at Morgan Stanley recently observed that as smaller operators merge or exit operations, top incumbents and Jio could potentially gain around10% of revenue market share in next 12 months. Over the past year smaller operators have lost 7% and 10% of the subscriber and revenue market share, respectively. Moreover, they added that since RCom and Aircel hold around 180 MHz of 1800 MHz spectrum, the Telecom Regulatory Authority of India’s (Trai) recommendation to raise the limit for overall spectrum holdings across all bands to 35% from 25% could be favourable for the top incumbent operators and Jio to augment their holdings if the spectrum is sold or auctioned.
Jio, which launched operations in September 2016, has so far built up a subscriber base of 145.9 million as of October, according to the Trai website. In the three months to September, the business reported revenues of `6,150 crore, which included the apportionment of recharges for H1FY18. This implied an average revenue per user of `156 per month, analysts at Kotak Institutional Equities wrote. For perspective, Bharti Airtel has 285 million subscribers, while Vodafone and Idea Cellular, which announced a merger in March, have 208 million and 190 million subscribers, respectively. The merger is awaiting approvals from the National Company Law Tribunal and DoT. Jio will be picking up 122.4 MHz of 4G spectrum in the 800/900/1800/2100 MHz bands, over 43,000 towers, around 1.78 lakh route kilometres of fibre with pan-India footprint and 248 MCNs covering nearly 5 million square feet used for hosting telecom infrastructure. Jio said in a statement that an asset monetisation process for RCom assets was mandated by the lenders of RCom, who appointed SBI Capital Markets to run the process.
Anil Ambani, chairman, RCom, had said at a press conference on Tuesday that the company expects to receive about Rs 25,000 crore from the monetisation of assets. He said the telco has arrived at a resolution plan that involves its exit from the strategic debt restructuring (SDR) scheme without conversion of any debt into equity by the lenders. The company’s press release on the sale of assets to Jio however, did not mention a consideration. RCom will utilise the proceeds of the monetisation of this cash deal solely to prepay lenders, a statement put out by the company said. The current debt of Rs 45,000 crore will be reduced through monetisation of telecom assets and real estate in New Delhi, Chennai, Kolkata, Jigni and Tirupati.