Etisalat has decided on a low-capital entry into India's communications market, outsourcing its passive telecom infrastructure requirements to Indian operator Reliance Communications and its subsidiary infrastructure services company Reliance Infratel.
Under an agreement announced on Wednesday, Etisalat's joint venture in India will pay the two Reliance companies 100 billion Indian rupees (US$2 billion) over ten years.
Etisalat has operations in 17 countries in the Middle East, Asia, and Africa. Its Indian joint venture, Etisalat DB Telecom, has licenses to offer telecommunications services in 15 circles in India. The Unified Services Access License it holds allows it to offer a variety of services including mobile and fixed telephony services, and Internet services.
The company plans to roll out services in India by the end of this year, starting with mobile services, a spokeswoman for Etisalat DB Telecom said on Wednesday.
Reliance Communications has set up the Reliance Infratel subsidiary to address a growing market from telecom service providers, particularly mobile service operators, for shared infrastructure services.
Etisalat DB Telecom said that by outsourcing the running of telecom infrastructure to Reliance, it will be able to accelerate its rollout of telecom services in India.
A number of telecom service providers are expected to take this route to get quickly to market, while existing mobile operators are hiving of their infrastructure businesses into separate services companies.
Idea Cellular, a large Indian mobile services provider, said earlier this month that it received shareholder approval to transfer its communications towers and other passive infrastructure to a subsidiary company, Idea Cellular Towers Infrastructure.
The new subsidiary will later be merged into a joint venture company, Indus Towers, that has been set up by three communications companies -- Idea, Vodafone Essar, and Bharti Airtel. The joint venture company will be in the business of building, managing and offering shared network infrastructure services.
By hiring infrastructure rather than investing in it, mobile operators can free up capital, Kamlesh Bhatia, a principal research analyst at Gartner said recently in an interview. As infrastructure gets commoditized, operators are instead focusing on marketing, brand, new applications, and service innovations, he added.