Reliance Plans to Start $12 Billion Telecom Network in 2015
Reliance Industries Ltd. (RIL), controlled by India’s richest man, will start a $12 billion telecommunications network next year to meet voice and data demand in the world’s second-most populous nation.
The company, which also runs the world’s largest crude oil refining complex, will offer so-called fourth-generation services covering 5,000 cities and towns and more than 215,000 villages, billionaire Chairman Mukesh Ambani told shareholders today at the company’s annual general meeting in Mumbai. The network will eventually span 600,000 villages, he said.
The rollout will mark the return of Ambani to a business he handed to younger brother Anil Ambani nine years ago as part of a split following a family feud. Telecommunications is part of a 1.8 trillion-rupee ($30 billion) expansion plan that includes the group’s traditional businesses of polyester, petrochemicals, refining and natural gas.
“Ambani’s focus on telecom and the non-oil businesses stand out in his speech this year,” said P. Phani Sekhar, a Mumbai-based fund manager at Angel Broking Ltd., which owns Reliance shares. “Non-oils will define Reliance over the next five years. But the market wants quick results, and a three-to-five-year timeframe doesn’t excite investors too much.”
Reliance’s shares fell 2.1 percent to 1,066.75 rupees at the close in Mumbai. The stock has risen 19 percent this year, tracking a similar gain for the benchmark S&P BSE Sensex (SENSEX), in which Reliance has the highest weighting.
Ambani’s wife Nita has joined Reliance’s board. India’s Companies Act now requires every listed company to have at least one woman as a director.
Four years ago, Mumbai-based Reliance had paid 48 billion rupees to gain control of Infotel Broadband Services Ltd., just hours after it bid for nationwide wireless broadband licenses. Reliance later said it will use a fourth-generation technology called long-term evolution, or LTE, to offer wireless broadband services.
“The boundaries of these startups and services are only limited by our imagination,” Ambani said today. “Digital infrastructure and digital services have the potential to add significantly to India’s GDP growth.”
The trials for Reliance’s telecom service are under way and will continue till early 2015, he said.
Reliance’s investments in telecommunications and other non-energy businesses, including retail, come as natural gas production from its biggest deposit wanes. The company and its partner BP Plc, which owns 30 percent of the KG-D6 block off India’s east coast, are waiting for the government to increase local gas prices after a decision was deferred on orders of the nation’s Election Commission in March. India has a new government following general elections last month.
Reliance and state-run explorers including Oil & Natural Gas Corp. (ONGC) would benefit from the gain in rates, which currently stand at $4.20 per million British thermal units.
Reliance operates two refineries, with a combined capacity of 1.24 million barrels a day, located next to each other at Jamnagar in the western state of Gujarat. They have the ability to process cheaper, lower grades of crude into high-value products for use in Europe and the U.S.
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