Reliance Jio offloads towers to settle Government bill

Telecoms disruptor Reliance Jio has been forced to sell its tower assets to Brookfield Infrastructure Partners for approximately $3.55 billion.

While Reliance Jio is not feeling the pinch as painfully as its competitors, the business is facing a significant financial outlay to settle a spectrum fees dispute which has been on-going for more than a decade. With 25,215 crore Rupees (c.$3.551 billion) in compensation for the tower infrastructure business, Reliance Jio should be in a healthier position, albeit a bit lighter on assets.

“We are pleased to enter into this long and strategic relationship with Brookfield, which is one of the largest and most respected managers of infrastructure assets globally,” said Mukesh Ambani, MD of the Reliance Industries group.

“We are confident of Brookfield’s abilities to manage this large portfolio of high-quality infrastructure assets and further enhancing value creation opportunities. This transaction demonstrates the belief of global investors in the potential of India’s digital opportunity.”

Although the disposal of assets, or at least 100% ownership of said assets, is not an entirely comfortable position for the telcos to be in, it is becoming increasingly commonplace around the world, for a variety of reasons.

Telefonica has been playing with the idea of an IPO or partial sale of its tower infrastructure business unit, Altice has recently sold off 49.99% of its newly separated wholesale business and Vodafone created its own standalone tower business mid-way through the year. These are examples of asset divestment, though it is to fuel the expensive jobs of 5G and fibre broadband. The India situation is of course slightly different, though it has the telcos frantically searching for additional cash.

An argument over the total amount telcos owed for spectrum fees came to a conclusion in recent weeks, with the courts ruling in favour of the Government. Unfortunately for the telcos, this means over a decade of licence fees, interest and missed payment penalties will now have to be settled. For Bharti Airtel it has meant asking the Government for relief, Vodafone Idea have threatened to shut the whole business down and Reliance Jio is offloading its tower business to Brookfield.

While annual licence fees for spectrum are common place, such lengthy legal cases to dispute them are not. In a healthy regulatory environment, the telcos complain but generally accept the prodding and poking of authorities. Considering the friction which is being witnessed between the telcos and authorities in India, this is anything but a healthy situation. Whether it is charging too much for spectrum, favouring certain telcos or mis-managing termination regulation, the Indian landscape is quickly turning into a farce.

The Telecom Regulatory Authority of India (TRAI) and the Indian Government are slowly killing off competition and sleep-walking the country towards a monopoly.