Reliance Jio Infocomm has entered into an agreement with Bharti Airtel under which the latter will provide a dedicated capacity to RIL’s telecom arm on its i2i submarine cable linking India and Singapore.
This deal along with the infra-sharing deal with RCom announced earlier this month provides RIL with access to significant infrastructure, both at home and overseas. We believe that, similar to the RCom infra-sharing transaction, this deal also has strategic merit from a long-term growth perspective.
It provides further visibility on Jio 4G LTE telecom venture. We expect launch of RIL’s telecom services by end of CY13E. Access to Bharti Airtel’s international data cable network is not only less expensive than replacement cost, but also gives RIL advantage on time-to-market for LTE services. It counters market concerns that RIL would have to buy significant telecom infrastructure for the venture, increasing non-core capex and diluting cash eturns in the medium term.