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RJIL’s acquisition of RCOM’s assets could bolster its 4G footprint, says Goldman Sachs

January 03, 2018

According to Goldman Sachs Equity Research report, Reliance Jio Infocomm Limited’s (RJIL) 4G footprint could potentially be higher than Bharti Airtel and the merged entity of Idea Cellular and Vodafone India after acquiring spectrum from Reliance Communications (RCOM).

Recently, RJIL bought RCOM’s entire liberalized spectrum in 900/1800/2100 MHz bands and it acquired RCOM’s 800 MHz spectrum from MTS. The report stated that RJIL’s proposed spectrum acquisition from RCOM would help it close the gap with Bharti Airtel (including announced transactions pending completion) and the Idea Cellular-Vodafone combined entity. In fact, on the wireless broadband spectrum (3G/4G) front, RJIL at 70 MHz per circle, would then be ahead of both telecom players.

According to the brokerage firm, while the 4G ecosystem exists for the 900 and 2100 MHz bands, RJIL has not used these bands to deploy network until now and that more than 60 per cent of the spectrum to be acquired by the operator from RCOM are in these two bands. Any deployment of network on these new bands may translate into incremental capex for RJIL, but access to more of sub-GHz spectrum will potentially help the operator in better indoor data coverage. However, the brokerage firm does not see RJIL having any meaningful near-term advantage in wireless broadband roll-out due to an increase in spectrum, given data capacity utilisation for all operators remains fairly low even on their existing spectrum footprint.

Further, the report pointed that RJIL’s acquisition of RCOM’s 43,000 towers will lower its network operational expenditure. This is because; RJIL was a tenant on about 30,000 RCOM towers till now. However, once the acquisition is completed this expense will be prevented. The report further added that the acquisition of RCOM’s towers would also take away the risk of rentals on such towers getting reset to a higher level on a future date if such towers were potentially acquired by a third party.

However, the brokerage firm does not expect a major financial burden on Reliance Industries Limited’s (RIL) balance sheet. This is a portion of the acquisition which is likely to form part of ongoing network expansion capex by RJIL. RCOM’s acquisition is also expected to help RJIL’s parent company to reduce its expenses.



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