RIL to offer 3G, WiMAX devices

Written by fe Bureau | Updated: Jun 7 2010, 09:33am hrs
Five years after its exit from the countrys booming telecom sector, Mukesh Ambanis Reliance Industries Ltd (RIL) is plotting the road map for a return trip. However, this time around, it wont be plain vanilla telecom services that RIL will be interested in, but rather the emerging segments of 3G and WiMAX. According to executives familiar with the development, the initial strategy is not to enter as a telecom operator, though this cannot be ruled out in the long run.

Officials told FE that RIL is looking at partnering major handset makers to help them produce low-cost 3G handsets at Rs 4,000-5,000, apart from WiMAX application devices. Currently, the handsets cost over Rs 16,000 on an average.Once the low-cost handset base is built, RIL would be open to buying bulk airtime from service providers and bundling them with handsets, to be sold via Reliance Retail stores.

It would be like re-selling airtime through a franchise or mobile virtual network operator model, but would be suitably improvised to make it unique, an official said. The airtime-bundled handsets would be co-branded, stamping RIL's entry into telecom.If we are able to drive down costs for 3G and WiMAX-based application services in a major way and popularise them, we would have created a similar wave which we did in CDMA with schemes like Monsoon Hungama, the official added.

With the valuation of telecom companies having fallen over 50% in just a year, RIL can, at a later stage, look to acquire a telecom operator either in the domestic market or globally. An RIL spokesperson declined to comment. After the Reliance group split in 2005, Reliance Infocomm went to younger brother Anil Ambani, who renamed it Reliance Communications and launched GSM services.

The demerger was followed by a non-compete agreement between the Ambani brothers, which effectively prevented RIL from entering telecom sector at a time when it was going through blazing growth. The agreement was scrapped on May 23, and FE was the first to report that the company was likely to enter telecom and thermal power sectors.

Launched in mid-2003 by the erstwhile Reliance Infocomm, Monsoon Hungama has been the most successful scheme in the history of India's mobile telephony, offering a phone connection and handset for merely Rs 500. The CDMA platform on which Monsoon Hungama was launched, was a novel and affordable alternative to the masses. RIL hopes to do the same with 3G and WiMAX services, both of which are yet to roll out. RIL is sitting on cash reserves of $5 billion and can generate $7-8 billion through treasury operations.

The company has the ability to generate surplus cash of $18-20 billion in the next one year. Reliance Infocomm entered telecom at a time when tariffs were in double digits and rules enabled operators to charge incoming calls.