Rationale of Sharing Costs: Reliance and Bharti Airtel sign deal

Reliance Industries and Bharti Airtel ink agreement to share towers

Reliance Industries 4G rollout

Reliance Industries which is expected to roll out its much awaited 4-G services across the country has tied up with the largest telecom operator of the country, Bharti Airtel to share its telecom infrastructure. This move is expected to bring a number of advantages for both the companies.

Expected benefits to new-entrant Reliance Industries

The new entrant into the highly competitive market would save on its cost of investment and operations as it would start its operations riding on the shared telecom infrastructure of Bharti.

This move is also expected to reduce the time for rollout of the services of Reliance. The group has been facing delays for the rollout of its much touted services and taking use of already established infrastructure is bound to reduce the time to begin the rollout of the operations. 

The move shall reduce the chances of duplication of resources and would help in the rationalization of costs for Reliance. It would make the company has an asset-light model and reduce the financial resources committed for capex plans.

Win-win situation for Bharti Airtel 

Bharti Airtel which has been saddled with enormous amount of debts would be given a much needed additional source of revenue. This deal is likely to bring in substantial sum of inflow into the coffers of the company. However, the exact amount of the deal value has not been made public so far.

Bharti Airtel can hope to recoup some of the investment value that it has spent so far in building its own telecom infrastructure.

Lessons for management student and entrepreneurs

It is advisable to have lighter capex allocations, especially in sectors and time when investment climate and regulatory systems are uncertain.

Managers should look to have tie-up which provide win-win deals for partners. This would help all parties to benefit.

Much action is expected to happen in this industry in the coming months. Watch-out for more action!