Reliance Jio signs pact with Bharti Airtel for cable network

Conglomerate Reliance Industries Ltd took a step closer to launching 4G services into a fiercely competitive Indian telecoms market with a deal on Tuesday to lease undersea cable capacity from Bharti Airtel.

Reliance, controlled by billionaire Mukesh Ambani, spent $3 billion in 2010 on 4G, including payment for nationwide airwaves, but has said little about its plans.

Last week, Reliance said its Reliance Jio Infocomm Ltd had finalised agreements with infrastructure providers and device makers, among others, for its 4G venture, without naming them.

The company's commercial launch, widely expected later this year, would bring a deep-pocketed newcomer to the market where fierce competition and regulatory turmoil have battered profitability and forced some players from the market.

"It's clear now that the launch is imminent," said Sandip Sabharwal, head of portfolio management services at Mumbai brokerage Prabhudas Lilladher, adding it would still take Reliance about a year to start 4G services.

Earlier this month, Reliance signed a fibre optic network-sharing agreement with younger brother Anil Ambani's Reliance Communications, their first business deal since ending a long running feud three years ago. The companies said they could cooperate further.

Tuesday's tie-up further signalled Reliance Jio's willingness to cooperate with competitors.

"The deal marks Reliance Jio's continued efforts to rapidly grow and expand both its network and infrastructure by building an ecosystem with multiple carriers and service providers," Reliance said in a statement.

Reliance and Bharti, India's biggest cellular carrier, declined to provide terms of the deal. Reliance also declined to say when it would launch the service.

"It is telling that they are trying to have international data connectivity. Reliance is trying to come up in a very big way and is pretty serious about the telecom business," said Ankita Somani, telecoms analyst with Angel Broking.

Shares in Reliance Communications, the No.3 cellular operator, slid about 5 percent in Mumbai trade on Tuesday, after the announcement of Reliance Industries' deal with Bharti, before paring some of those losses to close 3.3 percent lower.

Some in the market had said the tie-up between Reliance Jio and Bharti appeared to lessen the likelihood for future deals between the carriers controlled by the Ambani brothers. However, Tuesday's deal is for use of an undersea cable that connects Chennai to Singapore, a route on which Reliance Communications does not own capacity.

Reliance Communications had gained 76.8 percent in April through Monday, partly on hopes it would extend cooperation with Reliance Jio to include leasing tower space to the new carrier.

Reliance Jio has yet to announce any tower leasing partner.

Reliance Communications was hived off from the combined Reliance empire after the brothers split up the family businesses in 2005 in a deal brokered by their mother.

Reliance Industries shares ended 1.77 percent higher on Tuesday. Bharti shares gained about 2 percent after the statement before closing down 0.43 percent.

© Thomson Reuters 2013