Reliance Tele in $100 mn deal with Motorola, Huawei

Reliance Telecom, the GSM arm of Anil Dhirubhai Ambani Enterprises (ADAE), has put together a network and infrastructure equipment deal with Motorola, at a price that sets a new benchmark for such equipment in a cost-conscious market like India.

As part of the deal, which is estimated to be worth under $100 million, the US telecom vendor's Indian arm is expected to supply mobile switches, 3,000-4,000 base stations and related infrastructure to Reliance Telecom.

Reliance Telecom, with 1.73 million subscribers across eight circles, is looking at a sizeable expansion of its services.

The deal was scheduled to be announced at Barcelona, at the ongoing 3GSM World Congress, but the announcement was put off as Anil Ambani could not attend the event, sources familiar with the deal said. But both companies were slated to make a joint announcement on the issue soon, the sources added.

When contacted, a Motorola India spokesperson refused to comment. Sources in ADAE also declined to comment.

The buzz in Barcelona, where Ambani's presence was keenly awaited, is that the Motorola deal is extremely competitive in pricing terms for Reliance Telecom. "It is one of the cheapest prices quoted for GSM equipment," the sources added.

Motorola's equipment will come with switches made by Chinese telecom equipment manufacturer Huawei. Motorola and Huawei have a worldwide agreement for mobile switches, the core of a network.

Given its low-cost pricing strategy, it is being speculated that the Huawei component is at a rock bottom $2 per subscriber at the switch level, when compared with over $10 in the international market.

According to international market prices, a base station can cost between $150,000 and $180,000. Telecom Regulatory Authority of India has estimated the cost of a base station at about $160,000.

The equipment deal comes even as sources in the industry said the Anil Ambani-promoted company was in talks with China Mobile (Hong Kong) to offload stake in Reliance Telecom. Recently, Russia's AFK Sistema has also evinced interest in the company.

Reliance Telecom, the undivided Reliance group's first foray into telecom in 1995, had a market share of 2.79 per cent in January 2006.

It provides mobile services in West Bengal, Kolkata, Bihar, Assam, the Northeast, Madhya Pradesh, Orissa and Himachal Pradesh. Reliance Telecom is 65 per cent owned by the ADAE, while about 35 per cent are owned by the special purpose vehicle, Reliance Communication Ventures.