Reliance Industries Limited (RIL) made headlines by acquiring a holding stake in Infotel Broadband after the latter won broadband wireless access (BWA) licences in the June 2010 auction. RIL, through its subsidiary Reliance Infotel, is now the only pan-Indian BWA licence holder. The company is planning to launch BWA services by early 2012.

According to industry experts, Reliance Infotel, which will probably be one of the first operators to launch wireless broadband services in the country, plans to cover over 600 cities by mid-2012. It has selected long term evolution (LTE) as the technology platform for offering high speed broadband services with data connectivity speeds of 50-100 Mbps and above, much faster than the current 3G services.

Background

RIL acquired a 95 per cent stake in Mahendra Nahata’s Infotel Broadband in June 2010. Infotel, with five other operators, was awarded 20 MHz of BWA spectrum in the June 2010 auctions. RIL paid Rs 48 billion for acquiring the stake in Infotel by way of creating fresh capital and also paid over Rs 128.48 billion to the government towards spectrum fees.

RIL’s entry into the broadband space marked the end of all existing non-compete arrangements between Mukesh Ambani-led RIL and the Anil Ambani-led Reliance ADA Group. The two companies had signed the non-compete agreement in January 2006 at the time of the corporate reorientation of the Reliance group.

Company game plan

There are high expectations from RIL’s broadband venture. Industry experts suggest that Mukesh Ambani, who spearheaded the data revolution in 2002 with the launch of CDMA services by Reliance Communications (RCOM), is likely to create a similar model in the wireless data space.

On-the-go high speed connectivity is the key attraction of the 4G platform. RIL’s LTE trials conducted at its base station at Navi Mumbai have yielded a download speed of 80 Mbps and an upload speed of 20 Mbps. This is phenomenally higher than the 7 Mbps available from a 3G dongle and of 3.1 Mbps from 2G.

Known for its predatory pricing strategies, RIL may look to carve a strategy around low-cost offerings and high speed internet performance. A similar approach had been adopted when RCOM entered the telecom space with the launch of the aggressively priced Monsoon Hungama at Rs 500. The plan, which offered unlimited voice usage, won millions of customers for RCOM within a short span of time.

To reduce the overall cost of services, the operator is also focusing on affordability of customer premises equipment (CPE). To facilitate the launch of a low-cost LTE tablet by 2012, the company is in talks with 15 Taiwanese vendors for feasibility and prototypes. Canada-based DataWind, which launched the cheapest tablet, Aakash, recently, is also in talks with RIL to develop the world’s cheapest 4G-enabled tablet, priced at less than

Rs 4,000. “We have had preliminary talks with RIL. It is possible to embed an LTE TDD chipset in the tablet for 4G coverage,” says Suneet Singh Tuli, CEO, DataWind. If the deal is finalised, RIL would be able to offer tablets at nearly one-fourth the price of those that are currently on offer from phone makers like Apple, HTC, Dell and Motorola.

In terms of network rollout, Reliance Infotel has initiated the process of developing a world-class broadband wireless network using state-of-the-art technologies. “The company is finalising the arrangement with leading global technology players, service providers, infrastructure providers, application developers and device manufacturers to facilitate the 4G revolution,” says a company official.

RIL plans to invest $5 billion in telecom over the next two years, including $1 billion in rollout capex and around $2.75 billion in spectrum fees. It is currently in talks with three vendors – Alcatel-Lucent, Ericsson and Huawei – for broadband equipment. It is, however, unclear whether the operator will split the order or award the whole contract to one company. RIL is reluctant to invest in tower infrastructure for its network rollout and has adopted the tower sharing route to meet its requirements. It has invited bids from tower operators willing to lease out around 26,000 towers for its broadband venture.

As per market reports, RIL is also considering a tower sharing deal with RCOM’s tower subsidiary, Reliance Infratel. The deal, if it materialises, will give RIL faster time-to-market and help RCOM reduce its $7 billion debt. Also, according to analysts, the partnership may mark the end of the corporate feud between the Ambani brothers, who have not done business together since the division of Reliance’s assets in 2002.

Content, another key ingredient for the success of data services, is also high on Reliance Infotel’s priority list. The company has reportedly initiated talks with media and entertainment companies, including Walt Disney’s Indian venture UTV Software. The deal with Walt Disney, which is close to being finalised, will enable the company to offer game- and entertainment-based applications.

In November 2011, Infotel Broadband bought a 38.5 per cent stake in Extramarks Education. The acquisition will help strengthen Reliance Infotel’s content portfolio as Extramarks is strongly focused on delivering content using information and communication technologies.

The way forward

RIL is upbeat about the untapped opportunities  in the Indian broadband segment. In a presentation to analysts, it has stated that China has 130 million broadband customers and India can reach that number in the next three-four years. The company is aiming for the top position in this market and seems confident about its prospects. However, it would be premature to judge its performance before the services actually hit the market