Sunil Bharti Mittal led Bharti Infratel and Mukesh Ambani led Reliance Jio Infocomm have announced Passive Telecom Infrastructure Sharing agreement [Thanks to Dayanidhi Maran, then telecom minister for legalizing Passive Infrastructure Sharing] which will currently grant Reliance Jio access to Infratel’s Towers and Network Infrastructure. [In future, Airtel could also lean on Reliance Jio’s infrastructure]
Nash Equilibrium and Indian Telecom Sector: If you have watched the movie “A Beautiful Mind” you’ll probably know this. Dr. John Nash, a Mathematician, then a student @ Princeton extends on Adam Smith’s theory suggesting that Best results would come from everyone in the group doing what is best for himself and the group. Based on this Dr. Nash proposes his thesis which eventually wins him Nobel prize in Economics. Finally, Mittal and Ambani seemed to have realized this 🙂
According to the press release, pricing would be at arm’s length and based on prevailing market rates. Bharti Infratel’s average realization per tower is Rs38,000 per month per tenant. Notably, this is significantly higher than Rs15,000-20,000 per tenant per month implied in the deal between Reliance Jio and Reliance Communication which we had Questioned then indicating Shady Business practices by Mr. Anil Ambani of RCom.
Reliance Jio will need to roll out at least about 100,000 cell sites to have a meaningful 4G-LTE network presence for its service offerings to find acceptance. It has already tied up with Reliance Infratel (RCOM) for using 45,000 of its towers for network roll-out. Of the rest, we believe about 40,000-50,000 tenancies will accrue to Bharti Infratel and Indus combined.
With strong pick-up in demand for data services and Reliance Jio launching its services (possibly with multiple networks – TD LTE, FD LTE and basic 2G), telcos’ spending on network expansion is likely to increase in the coming years. Bharti Infratel is well positioned to capture the upside from such a trend as it has created a solid base of tower assets with pan-India coverage, making it the preferred passive infra partner for telcos looking to expand/improve their networks