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In the third infrastructure sharing agreement between firms run by brothers Mukesh and Anil Ambani, Reliance Industries' telecom arm has agreed to use Reliance Communication Ltd's intra-city fibre network to roll out 4G services.
Reliance Communications, controlled by Anil Ambani, may earn as much as Rs 5,000 crore (Rs 50 billion) from leasing out its fibre optic network.
Reliance Jio Infocomm Ltd, the telecommunications unit of Mukesh Ambani-run RIL, has signed a master services agreement with RCom based on "arm's length pricing at prevailing market prices," the two companies said in separate statements.
Reliance Jio is the only company to have nationwide 4G licence and is looking to start commercial services before year end.
It had in April last year signed a Rs 1,200 crore (Rs 12 billion) deal to hire RCom's inter-city fibre for its 4G network. In August 2013, it signed a $2.1 billion pact for leasing RCom's mobile phone towers.
As per the master services agreement signed on Monday, Reliance Jio will utilise RCom's nationwide intra-city fibre network for accelerated roll-out of its state-of-the-art 4G services across the country.
"RCom's intra-city optic fibre network extends to nearly 500,000 fibre pair kilometres, across the top more than 300 cities and towns in India," the statements said.
A source said fibre pairs per kilometre could cost as much as Rs 3-Rs 3.5 lakh in large cities like Delhi and Mumbai and they could be in the region of Rs 40,000-50,000 per kilometre of fibre pairs in smaller cities such as Patna or Rourkela or Jammu.
The national average, therefore, comes to around Rs 1 lakh per kilometre of fibre pairs. Since RCom has around 500,000 kilometers of intra-city fibre pairs nationally, and the overall deal size for intra-city fibre deal with Reliance Jio Infocomm, therefore, is potentially around Rs 5,000 crore.
This will be spread over the lifetime of the deal, which, typically, is around 15 years, the source added. "This 3rd agreement further strengthens the comprehensive
framework of business co-operation between Reliance Jio Infocomm and Reliance Communications, following the inter-city optic fibre sharing agreement signed in April 2013, and the nationwide telecom towers infrastructure sharing agreement signed in August 2013," the statements said.