Reliance Jio puts 3 options on table to monetise tower, fibre businesses

The board of Reliance Jio, which cleared a proposal to spin off its tower and fibre undertakings into separate companies, is looking at alternatives for monetisation, according to sources close to the company.

The first option is to lease its assets to competing telcos at a rental rather than only use them for captive consumption. Secondly, it is looking to bring in an international tower operator, especially in towers, as a partner, which will operate the assets either for a fee or by taking a minority equity stake. The third option is to go for an IPO.

Sources say Jio is open to leasing its assets, but the question is whether it will run it on its own or tie up with a global tower partner. The strategy behind the move, say analysts, is to find ways in which one could monetise the value of the assets and raise resources. A Reliance Jio spokesperson did not reply to an e-mail query. According to some tower companies, Jio has had talks with them on operating their towers that were being used for captive consumption as well as those it will acquire from Reliance Communications (RCom). However, the international players have been pushing it to go in for multi-tenancy contracts, so that they can monetise the assets, and tower companies can hedge their bets over a higher number of customers.

“As long as we do not have multi-tenancy it might not make sense for tower companies to get into an alliance with Jio based on just captive usage,” said a top executive of a tower company.

According to analysts, Jio has about 125,000 towers, though a substantial number of them are monopole towers (small towers). With the a acquisition of rcoms assets , they will add another  43,000 additional towers. Currently, Jio also leases out towers from indus as well as Bharti infratel. Currently monopole towers need an investment of around Rs 1 million compared to Rs 2-2.5 million for a ground-based tower and Rs 1.5 million for a tower mounted on roof tops.

Also, Jio on its own has laid over 300,000 km of fibre in the country and, with the acquisition of RCom’s assets, it will have another 178,000 km.

With more than 500,000 mobile independent towers in the country, telcos estimate another 250,000-500,000 towers will be required for covering 4G across the country. This number will go up manifold with 5G when more monopole towers power high-data speeds but with only a limited coverage area required to make the new technology a reality. Currently only 5 per cent of the towers are monopole, but, according to estimates, this would become 30 per cent in the next two to four years.

The strategy to spin off the two crucial assets is common among telcos. For instance, Bharti Airtel recently transferred its fibre assets to a newly-formed company and Vodafone-Essar is talking of taking the same route. For instance, after the proposed merger of Indus Towers, set up by Airtel, Idea and Vodafone, into Bharti Infratel goes through, Airtel have 34-38 per cent and Vodafone 27-33 per cent in the 175,000-merged tower entity, depending on whether the erstwhile Idea exists the business.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel