Mukesh Ambani' s Reliance enters telecom; buys Infotel

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Mukesh Ambani' s Reliance enters telecom; buys Infotel
New Delhi: Mukesh Ambani-led RIL entered the telecom arena, hitherto forbidden to it, with a bang, announcing a 4,800 crore acquisition of Infotel that emerged as the sole winner of pan-India broadband spectrum. The acquisition of 95 percent stake, through fresh equity infusion, values Mahendra Nahata group's Infotel at over Rs 5,000 crore, follows a truce arrived at between Mukesh and his younger brother Anil on May 23 wherein the warring brothers scrapped a non-compete agreement to allow each other's business flexibility. As a result of the acquisition, it would be imperative on part of cash-rich RIL to pay the government Rs 12,872 crore within this month for pan-India spectrum won by Infotel, but no official comment was made on this aspect. RIL is the largest profit making private company in the country clocking a net of Rs 16,236 crore in 2009-10 and has a net worth of Rs 137,171 crore, with its Chairman Mukesh known for creating large capacities as his business model. The company has cash and cash equivalent of Rs 21,874 crore as on March 31, 2010. Announcing the deal, RIL Chief, Mr Mukesh Ambani, said: "We see this as a next wave of value creation opportunity in the wireless broadband space. We believe this will pole-vault India's economy into the digital world at an accelerated pace while creating next generation tools that will enhance productivity and create world class consumer experiences." The deal was announced shortly after Infotel became the only pan-India bidder to acquire 20 MHz broadband spectrum at the end of the 16-day long auction this morning. Infotel promoter-director, Mr Anant Nahata, said: "We were in talks with RIL even before the auction for BWA started." After the twin announcement of spectrum auction and acquisition, RIL shares shot up by over three per cent to Rs 1046.25 a share, while Nahata group companies HFCL and HFCL-Infotel hit the upper circuit of five per cent with their shares soaring to a high of Rs 11.39 and Rs 10.14 respectively. Another Nahata group firm Datacom had acquired pan-India 2G telecom licence in 2008 with support of Videocon which had paid the licence fee of Rs 1,658 crore. Mahendra Nahata later exited the company for an estimated Rs 1,200 crore. There are also speculation that RIL could be interested in buying into Videocon Mobile, which as such is looking for a strategic partner. Though there is no confirmation on this, Mukesh Ambani's love for telecom business is no secret as it was he who created Reliance Infocomm (now Reliance Communications) ? a business that went to younger brother Anil as part of family settlement in 2005. After the deal, RIL said in a statement: "RIL will invest about Rs 4,800 crore by way of subscription to fresh equity capital at par to be issued by Infotel Broadband. Post this investment, RIL will own 95 per cent of the equity and infotel will be a subsidiary of RIL."
Source: PTI
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