RCom's subscribers not large broadband users: Expert

Mukesh Ambani-controlled Reliance Jio Infocomm Tuesday signed a Rs 1,200 crore telecom deal with Anil Ambani-controlled Reliance Communications. Speaking to CNBC-TV18 about this joint venture, telecom analyst Mahesh Uppal said this move will benefit both the parties. "Reliance Communications would welcome the fact that its infrastructure, in this case fibre and also towers are going to be put to more effective and more efficient use. For Reliance Industries, a huge amount of infrastructure will be in place, which is an extremely important part of that broadband business," he added.

Meanwhile, he also pointed out that since RComm itself was a late entrant, its RComm subscribers are not large users of broadband. Also read: Ambani brothers in Rs 1,200cr deal for fibre optic network

Here is the edited transcript of the interview Q: Reliance Jio and Reliance Communications have signed Rs 1,200 crore telecom deal. What do you make of this announcement? It is something that has been in the works for sometime. We have even seen brokerage firms write about this. A: Yes, it has been in the works for sometime. This is the good move for both the brothers. Clearly Reliance Communications, the Anil Ambani part of the business, has struggled in recent times. It would certainly welcome the fact that its infrastructure, in this case fibre and also towers are going to be put to more effective and more efficient use, and also being able to generate a fair amount of revenues. For Reliance Industries, Mukesh’s side, it is of course a huge thing as well, because covering the whole country with any kind of narrowband or broadband infrastructure, in this case broadband infrastructure is no joke. You really do need a huge amount of infrastructure in place, especially when you are talking about moving large amounts of data from one point to the other, especially the trunk routes or the metro routes where a lot of this fibre is an extremely important part of that broadband business. We often think of broadband at the wireless end, but there is a huge fibre end, the trunk part, the backbone part for Anil’s business would be extremely important to Mukesh’s. Q: We know that the formal announcement clearly gives specifics about the fibre sharing alludes to tower sharing at some stage the terms which perhaps would be finalised and announced in the coming days. But there is another policy change that is being deliberated upon and is half done and perhaps will possibly receive the stamp of approval very soon which is to allow the 4G spectrum to also be utilised for voice operations. If that were to come into play what kind of integrated benefit do you see playing out through this joint network sharing so to say? A: Certainly when you are able to also offer voice services, your capacity or your menu of services that you can offer increases. However, Reliance Industries (RIL) entering into voice is being made a much bigger deal of, it is because in the voice business having subscribers is the big deal. Having the spectrum or the right to offer voice services is certainly important but the critical part is the acquisition of customers which is not easy, which has taken years for incumbents to achieve. Most of the new players including the players like Uninor, MTS are struggling big time, they have hardly got 2-3 percent of market share and these are the better performing ones. So, we should not over estimate the value of Reliance (RIL) offering voice on its 4G spectrum. It is important as functionality but not important if you are thinking of it as a threat to 2G players at the moment, what happens in future we don’t know. Q: What are the possibilities for Reliance Communications customers being ported to the RIL 4G network? Is that a more likely event? A: If that happens, then you part answered my earlier question which is that the real issue is subscribers, and if RComm subscribers move to RIL it is that much better. But may I also remind you that RComm subscribers, because RComm itself was a late entrant, are not the kind of subscribers who are large users of broadband. The cream of customers is with the incumbents such as Airtel, Vodafone, Idea. RComm’s business is largely the voice business which will deliver the customers, but whether these customers are RILs first target is a different point.