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Monday, June 14, 2010

Reliance Ind makes bold bet with foray in telecom

Reliance Industries' re-entry into India's telecom sector will help the conglomerate tap opportunities in the untapped wireless data market as it aims to replicate growth of the mobile phone sector.

On Friday, the energy major, controlled by Mukesh Ambani, the country's richest man, unexpectedly agreed to buy Infotel Broadband, the only company to win a nationwide license in India's auction for wireless broadband.

The move by the deep-pocketed group would mean more competition for Indian telecoms firms, for whom voice has been the primary source of revenue so far, but are now also expanding into wireless data.

"I don't think Reliance is looking at this business being profitable in at least the next two years," said Sonam Udasi, head of research at IDBI Capital in Mumbai.

"Their past track record in areas apart from their core business has not been great," he said, referring to the petrochemicals-to-refining conglomerate's foray into businesses such as retail.

Mukesh been quick off the blocks to pursue deals after a long-running feud with his younger brother Anil ended last month and the brothers revoked a non-compete agreement.

Reliance, India's largest-listed firm, aims to offer wireless broadband connectivity to both retail and corporate clients across a vast geography, the company said.

A spokesman for Reliance said company would invest about $5 billion in the telecom venture over the next two years, including the broadband spectrum fee to be paid by Infotel.

Reliance will take a 95 per cent stake in start-up Infotel Broadband, the only firm to win a nationwide licence in India's broadband wireless spectrum auction.
Infotel's offer of $2.75 billion for the license topped forecasts while US chipmaker Qualcomm and India's biggest mobile operator, Bharti Airtel, also won spectrum in parts of the country in an auction that saw some of the biggest players in Indian telecoms emerge empty-handed.

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