Etisalat DB Telecom India (erstwhile Swan Telecom) and Reliance Communications (RComm) on Wednesday entered into a long-term passive infrastructure sharing agreement worth over Rs 10,000 crore ($2.2 billion), spread over a period of ten years. Under the terms of the agreement, Etisalat DB and its subsidiary will outsource their telecom infrastructure requirements, encompassing end-to-end tower and transmission infrastructure, for 15 telecom circles to Reliance Infratel, a 95% subsidiary and the telecom infrastructure arm of RComm.
Etisalat DB Telecom India, in which the Gulf Arab region’s second-largest telecom operator owns a 45% stake, has licenses to operate in 15 of India?s 22 telecoms zones and is expected to roll out its services by the end of the calendar year 2009. The remaining 55% stake is held by several entities, including Swan?s primary promoter, the Dynamix Balwas Group, a Mumbai-based real estate and hospitality business group.
Etisalat would start paying once they start availing the tower services. RComm has two nationwide networks, including its CDMA and GSM networks, and the Etisalat network will be the third. This is expected to be followed by RComm?s own wireless broadband (Wimax) or 3G networks.
?Reliance Infratel, which has close to around 50,000 towers, will help Etisalat DB to roll out its network without having to put up new towers, which would incur an upfront investment. Both companies gain in terms of cost optimisation. Since there is a marginal increase in capex and cost, the value mentioned largely flows to the bottom line,? said Inder Bajaj, president, Reliance Infratel.
With this deal, analysts expect Reliance Infratel’s current tenancy ratio, or the total number of operators sharing the towers/total number of sites present, which is at 1.6-1.7, to go up to around 1.9 – 2. Indian mobile operators are increasingly sharing base stations and tying up with other firms and independent tower firms to cut costs, as they expand deeper into semi-urban and rural areas. Overall, the telecom industry is moving towards a tenancy ratio of 2 in India.
Earlier this year, Norway?s Telenor, which has picked up a 67.25% stake in Unitech Wireless, had signed an infrastructure sharing deal with the Tata-Quippo. Both the tower sharing and transmission agreements have 20 year terms with options to extend them for a subsequent five-year period.
?As a new entrant in this dynamic market, this alliance provides us with key, strategic advantages that will ensure a robust speed to market and cost-effective roll-out of services. Strategic alliances are an integral part of our plans for growth and Etisalat Group will always be receptive to such alliances which help enhance the customer experience,? said Mohammad Hassan Omran, chairman, Etisalat DB Telecom, in a statement on Wednesday.