Reliance Industries shuns RCOM, strikes a deal with Airtel
R Chandrasekaran
Mukesh Ambani led Reliance Industries’ arm Reliance Jio Infocom has shunned Anil Ambani-controlled Reliance Communications for sharing submarine cable network contrary to the market expectations thus indicating that business is above the relationship. Instead, Reliance Jio preferred to strike a deal with a leading service provider Bharti Airtel for the same facility.
Expectations were running high after the two brothers buried the hatchet to strike a business deal that allowed the cash-starved Anil Ambani’s RCOM to earn around Rs.12 billion. Markets were expecting both the group to extend their bonhomie to other areas of business as well. This included sharing of other infrastructures of RCOM such as submarine cable by Reliance Jio Infocomm, and a possible alliance for a banking license though both the groups have the wherewithal to start banking operations individually.
Today’s announcement of Reliance Jio Infocomm tying up with Airtel came as a bit of a surprise to investors. The deal has had its impact on the shares of Anil Ambani led-RCOM in Indian bourses, losing more than 5 percent at one point of time. Interestingly, ROM gained over 70 percent following its deal with Mukesh group until Monday’s closing.
The financial terms of the latest deal have not been disclosed. The deal signals that when it comes to business, it is not averse to strike a deal with anyone, be it RCOM or Airtel. The deal allows Reliance Jio to use Airtel’s i2i submarine cable connecting to Singapore thus providing big hubs in the Asia – Pacific zone.
The two companies said in a statement that, “The deal marks Reliance Jio’s continued efforts to rapidly grow and expand both its international and domestic network and infrastructure by building an ecosystem with multiple carriers”. The statement further added, “Bharti and Reliance Jio will continue to build on this strategic framework and consider other mutual areas of cooperation and development”.
The catch is exactly here. When both Reliance Jio and Bharti disclosed that they will continue to build their relationships for mutual development, it is quite clear that RCOM will not be an automatic choice for any channel partnerships in future too and that this is not just a one off deal with Bharti. This suggests the possibilities of both the Ambanies striking more deals at least on telecom sector look reduced.
One of the possibilities for Reliance Jio for striking a deal with Airtel could be to have Airtel for international business, while RCOM’s services could be used for domestic purposes. However, Mukesh keeps his plans close to his chest and it will not be a surprise that if his company prefers Anil’s RCOM for expanding his ambitious 4G roll out plan.