Mukesh Ambani's Reliance to Pump $2.2 Billion Into Jio Unit

  • FY17 to be wireless unit's full year of operations: official
  • Jio may consider spectrum pacts with smaller carriers

Billionaire Mukesh Ambani’s Reliance Industries Ltd. plans to inject about 150 billion rupees ($2.2 billion) into its wireless unit as it prepares to take on peers such as Bharti Airtel Ltd. in the world’s second-largest mobile phone market.

The unit, Reliance Jio Infocomm Ltd., will issue 15 billion new shares at 10 rupees each to existing shareholders, the India-based company said in an exchange filing late Monday, without saying how it would spend the money. The industrial group owns more than 99 percent of the affiliate, according to its 2015 annual report.

Ambani, India’s richest person, is plowing more money into the wireless business as he prepares to shake up the country’s crowded, indebted industry by introducing fourth-generation wireless services through Jio. The Reliance unit has been buying spectrum since 2010 under a plan to return this quarter to a market that now has more than 1 billion mobile subscribers.

“They will need more investment to deploy the network and service working capital requirements as the launch nears,” said Naveen Kulkarni, an analyst at PhillipCapital India Pvt. in Mumbai.

Working on Rollout

The company is working toward the rollout of the service, and the full year of its operations will be the financial year starting April 1, Anshuman Thakur, an official at Jio, told reporters in Mumbai on Tuesday after Reliance reported its quarterly earnings. Ambani had earlier indicated that Jio would start commercial services in December.

Reliance Communications Ltd., controlled by younger brother Anil Ambani, signed a spectrum trading and sharing pact with Jio on Jan. 18 across 17 wireless circles in 800 megahertz band, giving the start-up carrier access to lower frequency airwaves that are better for high-speed data transfer. Reliance Communications has sought permission to share airwaves in 20 circles from the Indian telecom ministry and was asked to pay a fee of 53.84 billion rupees ($798 million) last month to secure the approval.

Smaller Carriers

Jio’s capital expenditure now is “above 1 trillion rupees,” not accounting for the payment for the spectrum pacts, Thakur said, adding Reliance Communications hasn’t been paid anything for the spectrum agreements yet. Jio could evaluate options for sharing and trading airwaves with smaller carriers, Joint Chief Financial Officer Srikanth Venkatachari told reporters.

Reliance Jio is expected to get 80 million subscribers by March 2018, with more than half churning out of the top three operators, according to a Jan. 11 report by CLSA, “escalating the competition and impacting realisations.” Billionaire Sunil Mittal, chairman of India’s largest carrier Bharti, had said Jio’s entry will shake up the sector and trigger consolidation.

Profit at Reliance in the quarter through December surged to an eight-year high as refining margins widened. Shares advanced 2.6 percent to 1,043.60 rupees in Mumbai on Tuesday, outpacing the 1.2 percent gain in the benchmark S&P BSE Sensex.

Reliance spun out its previous telecom business to the younger brother in the wake of a family dispute in 2005.

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