Airtel undersea cables to carry Reliance Jio data

Mukesh Ambani?s Reliance Jio Infocomm on Monday surprised the market by sealing an international data connectivity deal with the Sunil Mittal-led Bharti Airtel, sending out a signal that the billionaire?s return to telecom would be more collaborative and less disruptive.

Since Ambani?s 2002-03 telecom foray was marked by a fierce rivalry with Mittal?s Bharti, the pact ? in which Reliance will use Bharti?s undersea i2i submarine cable networks to provide data connectivity across Asia Pacific ? is seen as significant.

Coming close on the heels of Reliance Jio signing a similar pact for inter-city data traffic with Anil Ambani?s Reliance Communications, the latest move signals that collaboration will not be restricted to the family. The market will now tune into the tower-sharing pacts Reliance Jio is expected to sign next ? whether it would be only with RCom or extend to others as well. Reliance Jio officials have maintained that the company?s model would be ?asset-light?, based on a range of partnerships where buying equity is ruled out.

Such concerns led the RCom scrip fall as much 5.46% after the announcement, to finally close down 3.28% at R94.50 on BSE. Bharti closed down 0.43% at R299.45 while RIL closed up 1.74% at R803.50.

?Reliance Jio Infocomm will use the dedicated capacity on Bharti?s i2i submarine cable that connects India and Singapore to extend its network to customers in the Asia-Pacific region,? the companies said in a joint statement, without revealing any commercial terms.

The i2i cable connects India to Singapore and is wholly owned by Bharti. Its landing points are at Chennai in India and Tuas in Singapore. Reliance Jio will utilise a dedicated fibre pair on i2i. The high-speed link will enable Reliance Jio to extend its network and service reach to customers across the Asia-Pacific. It will connect Reliance Jio directly to the world?s major business hubs and internet service providers, helping the operator meet bandwidth demand and provide ultra-fast data speeds to customers.

The statement said the two companies will consider other ?mutual areas of cooperation and development to leverage their respective assets?.

Reliance Jio is the only operator to have spectrum in all 22 circles to provide broadband wireless access (BWA) services. Interestingly, Bharti Airtel also has spectrum to provide similar services in eight circles and has launched services in four. Reliance is yet to start its services.

?The tie-up with Bharti means Reliance is open to players other than RCom as well, which decreases the probability of further deals between Reliance Communications and Reliance Industries,? said G Chokkalingam, executive director and chief investment officer, Centrum Wealth Management.

Industry analysts said the deal is beneficial to both because surplus infrastructure has been created in the market. While Reliance Jio gets a ready infrastructure to launch its services at a faster pace, the pact opens a revenue stream for Bharti Airtel.

?Such deals are good from the industry point of view, as it results in sharing of infrastructure which is costly to build. It is part of industry consolidation and could be a win-win for all including the ultimate consumer,? said Hemant Joshi, partner, Deloitte Haskins & Sells.

Bharti Airtel?s global network runs across 225,000 km, covering 50 countries and 5 continents. Over the last 4-5 years, the company has invested over $500 million in cable systems.

Bharti Airtel?s international infrastructure includes ownership of i2i submarine cable system connecting Chennai to Singapore, consortium ownership of SMW4 submarine cable system connecting Chennai and Mumbai to Singapore and Europe, and new cable system investments like Asia America Gateway (AAG), India Middle East & Western Europe (IMEWE), Unity, EIG (Europe India Gateway) and East Africa Submarine System (EASSy). It also has terrestrial express connectivity to neighbouring countries including Nepal, Pakistan, Bhutan and China.