Looking at the growing need of technology, every company wants to stay ahead of the competitors and one such sector that is making best use of latest technology is the telecom sector. Of late Reliance Industries Limited has opened new channels with MTNL, one of the top 3G service providers, to market its services as a franchisee. According to the reports, after this offer by Reliance Industries Limited, Mahanagar Telephone Nigam raised high in the share market with the price of each share rising by 2.59 per cent to Rs. 65.35. The reports reveal that if the deal between both the companies is cracked, then MTNL will get the rights to sell 3G services of Reliance Industries under its own name. The services will be marketed under MTNL’s name; however the billing and payments department will remain with Reliance Industries only.
According to the reports, the talks are in the nascent stage only but the move is seen as a beneficial one for both the parties. Reliance Industries looks interested in this deal as recently RIL has ventured into the broadband sector and acquired 95 per cent share of not so famous internet service provider, Infotel Broadband Services Pvt Ltd. After entering the broadband sector, Reliance Industries Limited decided to build partnership with service providers, technology firms and device manufacturers. Partnering MTNL come across as a profitable and intelligent deal as MTNL is already offering 3G services in Delhi and Mumbai with around 4 lakh subscribers.
On the acquisition of 95 per cent share of Infotel Broadband Services Pvt Ltd. one of the rating agencies said, “Its strong financial balance sheet, with current cash and cash equivalents of more than $6 billion, and $7-8 billion in projected annual cash flow, can easily accommodate the price tag for Infotel and the expected $2-3 billion in additional capital outlays (excluding licence fees) during the initial years.” As per the reports, MTNL initially invited bids in July 2009 and it also shortlisted Virgin Mobile and Spice Group, however the deal could not work out due to regulatory issues.
The experts feel that RIL’s decision to partner with MTNL is a strategic move as other licensed telecom service providers are not permitted to bid for MTNL’s 3G franchise. Since there is no confirmation about this partnership from both the parties, it seems that MTNL may look out for other bidders as the company has already floated the tenders in the market for bidding 3G service.