Reliance Jio Infocomm (RJio), a wholly-owned subsidiary of Reliance Industries Ltd (RIL), is craving out its fibre and tower assets into two separate companies that will provide it the flexibility to lease out the assets at a later point in time.

Further to the creation of two separate companies, RJio will continue to function as a telecom service provider. The two new companies – names of which are yet to be decided – will operate as wholly-owned subsidiaries of RJio, sources, who requested anonymity, said.

On Tuesday, RJio got board approval for the demerger, while the decision is subject to further regulatory and shareholders’ approvals, the company said in a regulatory filing.

“This move will enable the companies to work as separate infrastructure providers (IP), a company offering independent tower services and another leasing out optical fibre to other telecom players and internet companies. The split will enable the companies the flexibility to offer their services separately,” a source close to the development said.

At present, RJio owns and operates about 2.20 lakh towers and fibre assets of close to 3 lakh route km.

“These are the assets that would be hived off into a separate firm,” the source said, adding, this has been the norm in the sector with other major players separating infrastructure into different firms.

Present employees handling tower and fibre are likely to moved to the new firms. They, however, did not provide a timeline for the completion of the hiving off process.

On Monday, a Sanford C. Bernstein & Co report said that RJio could emerge as the industry leader on revenue basis by 2021 and subscriber basis by 2022. The company controlled by India’s richest man Mukesh Ambani will continue to provide subsidy for JioPhones, which now RJio sells for a refundable deposit of ₹1,500, till this goal is realised.

Bernstein now expects RJio to reach 28 per cent revenue market share and 26 per cent subscriber share by this fiscal year-end.

For the second-quarter ended September 30, RJio posted a net profit of ₹681 crore, making its fourth consecutive quarter of profits, and added 37 million new customers during the quarter, the highest since the launch of its commercial services. RJio’s subscriber base crossed 252.3 million, while the churn stood at 0.66 per cent.

However, its Average Revenue Per User (ARPU), a financial metric for a telecom firm, stood at ₹131.7 during the quarter.

Earlier in October, RIL announced plans to acquire a controlling stake in DEN Networks and Hathway Cable for ₹5,230 crore, gaining access to 25 million homes for its wired broadband services. RIL will pick up a 66 per cent stake in DEN through a primary investment of ₹2,045 crore via a preferential issue and secondary purchase of shares for ₹245 crore from the existing promoters. In Hathway, it will invest ₹2,940 crore through a preferential issue for a 51.3 per cent stake.

 

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