India’s Ambani brothers have come together on a network-sharing deal that represents their first collaboration since the Ambani business empire was divided between them in 2005.
Under a contract signed this week, Anil Ambani’s Reliance Communications (Mumbai, India) will share its fiber-optic network with Mukesh Ambani’s Reliance Jio Infocomm (Mumbai, India) in exchange for a one-off payment of INR12 billion ($220 million).
Reliance Communications will also be allowed to use the infrastructure of Reliance Jio Infocomm.
The relationship between the two brothers has reportedly been a frosty one, and in 2005 they agreed to split up the business interests developed by Dhirubhai Ambani, their father.
Under the arrangement, Anil Ambani gained control of finance, power and infrastructure businesses, including Reliance Communications, while Mukesh Ambani took over Reliance Industries, which is active mainly in the petrochemicals industry.
The agreement meant the brothers were not in direct competition with each other, but that all changed when Reliance Industries bought a majority stake in Infotel Broadband Services in 2010.
Having since rebranded the company as Reliance Jio Infocomm, Mukesh Ambani is now preparing to launch 4G technology, which will make Reliance Jio Infocomm a rival to Reliance Communications in the market for mobile internet services.
According to a report from Dow Jones Newswires, the agreement between the two companies will allow Reliance Communications to reduce its debts, which amounted to about $6 billion at the end of December 2012.
Dow Jones also cites a source familiar with the matter as saying that this week’s agreement is likely to lead to further collaboration between the two operators.
Another source described the deal as a particularly positive move for Reliance Jio Infocomm, which would need to spend much more than INR12 billion to build its own fiber-optic network.