RIL gets a boost with spectrum delink, sharing

Written by Rishi Raj | New Delhi | Updated: Feb 17 2012, 12:25pm hrs
A demerger of the family business forced Mukesh Ambani to give up his telecom dream. The delinking of telecom licence and spectrum could help him rekindle it.

Apart from leading telecom operators like Bharti Airtel, Vodafone and Idea Cellular, Mukesh Ambanis Reliance Industries (RIL) stands to gain significantly from the multiple policy measures announced by telecom minister Kapil Sibal on Wednesday, say analysts. Further, if RIL decides to participate in the forthcoming auction of 2G spectrum as directed by the Supreme Court, it could pose a major challenge to new operators like Uninor.

RIL, which holds a pan-India licence and spectrum for broadband wireless services through its acquisition of Infotel Broadband, recently tied up with the Network18 Group to offer content. The latest policy changes enable the company to offer voice telephony the only missing link in RILs telecom bouquet at a very competitive price point.

The company, however, is yet to unveil its telecom strategy. When contacted for its comments, the company declined to participate for the story.

This is how RIL could re-enter voice telephony: With Sibal delinking telecom licences and spectrum, any company can apply for a pan-India telecom licence for around R20 crore (as per the Telecom Regulatory Authority of Indias preliminary recommendations). After this, the company is free to participate in any auction and buy spectrum from the market. If it wins spectrum, it can quickly offer 2G voice telephony through spectrum sharing agreements with other operators. Sibal on Wednesday allowed companies to share spectrum.

Suppose RIL decides to make tablets using its high-speed wireless broadband, offering exclusive content from the Network 18 stable. If it wants to offer voice services as well, the only option so far is to partner with a mobile operator. But under the new policy framework, RIL could do the same on its own and market dynamics would ensure that the same gets done through its asset-light approach.

When RIL acquired Infotel Broadband in 2010 to get pan-India BWA spectrum in the 2.3 GHz band, its entry into voice business was doubtful the reason being it had acquired Infotel for around R13,000 crore and it could offer voice telephony only by acquiring an existing mobile firm at a high cost. (BWA licence conditions prevented the holders from offering voice services).

Further, chairman Mukesh Ambani had outlined that his telecom business would be asset-light and based on a range of partnerships.

Since much more spectrum is available now than is required, whatever the reserve price fixed by the Trai and auction design finalised by the department of telecommunications, the final price will not be very high. Thus, RILs getting into the voice business can happen at a very cost-effective rate.

Now, after close to two years, the policy of delinking of licence and spectrum has created a whole new opportunity for RIL. It can easily fill the missing link - voice - in its portfolio in a cost-effective manner. This would help the company as globally a standalone broadband business has never proved viable, said an analyst.

According to another analyst, all that RIL would have to focus on if it enters voice business is garnering subscribers, which would not be difficult for it.