Reliance Jio Infocomm Tower Sharing with RCom – Positive for RCom

Reliance Communications has acknowledged that it is in talks with Reliance Jio Infocomm to rent or lease towers from RCOM for the latter’s rollout of its 4G TD-LTE network. RCOM has a portfolio of around 55,000 towers with no external tenancy. It will be an impossible task for Reliance Jio Infocomm to rollout a Nationwide Network within few months for its ambitions launch considering the Manpower cost as well as the concerns of Right of Way for Underground OFC Cables.

We believe that a tower-sharing deal would be incrementally positive for RCOM. At an estimated tower rental of Rs30,000/tower/month, cash inflow could be around Rs9bn/p.a assuming Reliance Jio rents around 25,000 towers. Since the tower-sharing deal is likely to have a long tenor, RCOM could securitise the cashflows to reduce its debt burden.

RCOM’s country-wide CDMA network and 3G spectrum in the high potential markets of Mumbai and Delhi give it an opportunity to gain a better competitive position to other 4G LTE Players in the Market.