Jio’s move come barely a month after Vodafone Idea charted out its plans to demerge its fibre infrastructure business by transferring such assets to a wholly-owned unit, Vodafone Towers Ltd (VTL).
MUMBAI: The Reliance Jio Infocomm (Jio) board has cleared hiving off the telco’s tower and fibre assets into two separate units, a move that will make it easier for the mobile phone company to monetise them in future as it competes with rivals Bharti Airtel and Vodafone India in a capital intensive industry.
“The Board of Directors of the Company, at its meeting held today, accorded its approval to: (i) a scheme of arrangement for transfer of its fibre undertaking, on a going concern basis, to a separate company (ii) a scheme of arrangement for transfer of its tower undertaking, on a going concern basis, to a separate company,” Jio said in a notice to stock exchanges on Tuesday.
The decisions will need to go through necessary regulatory approvals, the Mukesh Ambani-owned operator added.
The new entrant has over three lakh route kilometers of fiber, and uses about 2.2 lakh towers – including over a 100,000 of its own towers and those from Reliance Communications (RCom) and other third party tower companies - for its operations, according to people familiar with the matter.
But as of now, only Jio’s own towers will be transferred into the new unit. The people added that RCom’s fibre and towers will also be a part of the new units eventually. RCom has already sold its 1,78,000 route kilometres (route km) of fibre assets to Jio and is set to also sell its 43,000 towers to the new telecom entrant.
According to analysts, this move will help Jio in multiple ways. “By hiving off into units, it will make the operating company asset light, increase its ability to leverage and open up the units for monetisation,” said a senior industry executive, who did not want to be named. Another analyst added that the monetisation opportunities could include leasing out the assets to other companies and even selling stakes in the units.
Jio, along with Bharti Airtel – and Vodafone Idea to a lesser extent – has been investing top dollars into expanding their 4G infrastructure amidst an intense fight for market share.
The executive added that going ahead, the move will also increase Jio’s profitability.
The latest entrant, which started commercial operations just over two years back, has already racked up over 252 million users, and has been rapidly closing in on market leader Vodafone Idea and second ranked Bharti Airtel in terms of subscriber base and revenue market share.
Jio, which is the only telco posting profits compared to losses for Vodafone Idea and Bharti Airtel’s India operations, is in fact following the example of its two rivals in hiving off these two assets into separate units.
Recently, Bharti Airtel and Vodafone Idea hived off their fibre assets – 246,000 route kms and 156,000 route kms respectively – into separate units. While Vodafone Idea, in desperate need for cash, plans to monetize the fibre assets, Airtel is looking to form an independent fibre company and could also monetize its holdings in the unit at a later stage.
Bharti Airtel and Vodafone Idea also jointly own tower company Indus Towers – with over 123,000 towers. Indus is in the process of merging with Bharti Infratel, India’s only listed telecom tower company which owns over 39,000 towers on its own. Airtel holds its stake in Indus through Bharti Infratel, its unit. Airtel has also been selling parts of its stake in Infratel to raise funds to be competitive against Jio, while Vodafone Idea is also expected to monetize a part of its stake in the merged entity created through the Indus-Infratel merger.
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