Reliance Communications co-operation with Reliance Jio Infocomm is expected to be extended to tower assets and intra-city fibre assets as well. We raised some Key Questions with the managements of both the companies which have went un-answered.
1. Quantum of towers which will come up for monetization over next 2 years- We are of the view that Reliance Jio 4G LTE launch will be gradual and as such expect only 15k towers to be monetized by FY14e (RCOM 2G BTS in 3 metros is estimated at 8500)
2. The height of towers – A large part of the present tower base was largely built for CDMA (16k RCOM towers were newly built for GSM) aligned for low MHz spectrum. Notably Reliance Jio 4G LTE has spectrum in the higher 2.3 GHz band and RCOM’s ability leverage a lot of towers will come with an incremental CAPEX.
With such a scenario it is premature for good valuations for RCom, as a lot will depend on the time 4G services take to attract critical mass (ecosystem challenges) and the outcome of CDMA ( declining prospects suggest reduction in tenancy).