How RIL, Hutch & Idea plan to cut costs

Anil Ambani-controlled Reliance Communications has entered into an agreement with GSM service providers Hutchison-Essar and the Aditya Birla-controlled Idea Cellular to share passive infrastructure for cell sites.

The agreement will help the company in faster rollout and would result in significant cost reduction.

The agreements were signed between RCL and Hutch on Wednesday evening and the deal with Idea Cellular was inked this morning, a Reliance spokesperson told PTI.

"A model guideline for infrastructure sharing has been worked out... which incorporates the areas of co-operation between RCL-Hutch and RCL-IDEA Cellular," the company official said.

Under this model, the sharing of costs for existing as well as future passive infrastructure has been factored in, he said. Under the agreement, both companies will have access to each others' cell sites across the country. A Hutch spokesperson however did not comment on the issue.

"Sharing of passive infrastructure would result in faster rollout, significant savings in capital expenditure and would also reduce the operational expenditure thereby adding inherent strengths to the efficiencies," he said.

Each cell site capex costs around Rs 28-35 lakh for passive infrastructure creation based on the city, which essentially goes towards creation of towers and establishing passive links, power backup and the cell site control housing unit.

The cost per cell site ranges from Rs 1.5 lakh to Rs 2.5 lakh a month on an average. Under the agreement, Reliance, the largest CDMA operator in South Asia who recently has expressed enhanced nationwide focus in GSM services, will get access to over 16000 and 7000 existing cellsites of Hutch and Idea Cellular respectively.

There would be a rental charged to the company who is seeking infrastructure on a pre-determined calculation mechanism, the official said. Reliance Communications has a capex plan of $1 billion this fiscal for wireless business and a similar amount earmarked for next fiscal.

The company is looking at a dual network play by offering GSM services in order to capture a substantial market share of the 500 million projected subscriber base by 2010 and is looking at enhancing its wireless market share that stands at 22 per cent currently.

Currently, it is present in 21 CDMA circles and eight GSM circles.  The total subscribers of Reliance stand at over 26 million. Hutch offers GSM services in 16 GSM circles having around 18.4 million subscribers.