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| Mukesh Ambani, chairman of Reliance Industries |
MUMBAI—In December 2010, Mukesh Ambani, India's richest man, circulated a 36-page handwritten memo to executives that spelled out his plans to build one of the world's most advanced telecommunications networks.
The memo, which has been reviewed by The Wall Street Journal, described a fourth-generation, or 4G, wireless service with "99.999%" network availability; "integration with an app store, ours or others" to help smartphone users order fast food or buy movie tickets; sourcing of mobile devices from China and Taiwan; content delivery to "3 screens," cellphones, laptops and TVs; and two 300,000-square-foot data centers.
Dec. 27, 2002: Reliance Group launches a cellphone company, Reliance Infocomm, on the birthday of company founder Dhirubhai Ambani, who had died earlier that year.
June 18, 2005: After a protracted feud, Mukesh and Anil Ambani announce they are splitting Reliance into two. The younger Anil takes the telecom assets. The brothers sign an agreement vowing not to compete on each other's turf.
April 3, 2010: India's Department of Telecommunications releases the list of bidders for the broadband wireless 4G auction. Infotel Broadband Services is one of 11 companies vying for the airwaves.
May 23, 2010: The Ambani brothers agree to scrap their noncompete pact emanating from the 2005 split, allowing Mukesh to enter telecommunications if he chooses. The 4G auction begins the next day.
June 11, 2010: The auction ends and Infotel wins 20 megahertz slices of spectrum in each of India's 22 market areas. The same day, Mukesh's Reliance Industries announces the purchase of a 95% stake in Infotel for $870 million. Reliance Industries goes on to pay $2.3 billion for the spectrum Infotel won.
Dec. 10, 2010: Mukesh circulates a memo to executives detailing Reliance's vision for a near-nationwide 4G wireless network involving state-of-the-art smartphones, an app store, huge data centers, and video content delivery to cellphones, TVs and PCs.
Dec. 13, 2010: Anil's cellphone company, Reliance Communications, by now one of the largest wireless carriers in India, launches 3G broadband service in four cities.
Jan. 3, 2012: Independent Media Trust, of which Mukesh's Reliance Industries is sole beneficiary, announces an investment in Network18, a media company that runs India's versions of CNBC, MTV, Nickelodeon and CNN. As part of the deal, Reliance's Infotel subsidiary gets preferential access to Network18 content.
June 7, 2012: At Reliance Industries' annual meeting, Mukesh tells investors the firm is finalizing plans to offer nationwide wireless broadband services, but provides no details.
Nearly two years later, Mr. Ambani, chairman of the energy conglomerate Reliance Industries Ltd. is putting some of those plans in motion in the hopes of vaulting India to the forefront of wireless broadband technology and bringing millions of Indians online for the first time. But the project has already hit a few early roadblocks, and success is far from guaranteed.
Reliance's plans cover a large swath of India. It identified 700 cities to target, including 100 high-priority markets, according to a person briefed on the matter. Delhi and Mumbai would be the first big launches, the person said. The effort could cost more than $10 billion, according to estimates by analysts, and it could require setting up tens of thousands of new cell towers. Already, Reliance has spent more than $3 billion to acquire radio spectrum covering all of India. Mr. Ambani also aims to make Reliance a TV provider by building a superfast fiber-optic network stretching into homes in urban areas, according to people familiar with the project.
A large field trial of 4G services is under way in the western town of Jamnagar, site of Reliance's own oil refinery, people familiar with the matter say. And Reliance has started laying down underground fiber-optic cables in parts of India that will connect cell towers to the core network, the people say.Samsung Electronics Co has emerged as the front-runner in the global sweepstakes to provide 4G gear for Reliance's build-out, the people add, though other equipment companies may get some deals, too.
Samsung said it doesn't comment on market speculation.
Mr. Ambani, 55 years old, is India's most powerful industrialist. He is credited with building on the rags-to-riches success of his father, Dhirubhai, who founded Reliance. He has pushed the firm's transformation from a polyester textile-maker into an energy-and-petrochemicals giant. He also has a habit of building big projects, from the world's largest oil refinery to the 27-story mansion he erected for his family in central Mumbai.Reliance hasn't disclosed any of its rollout activities or plans publicly, and it declined to respond to a list of specific questions. People familiar with the project say Reliance's rollout plans are evolving constantly and could change again.
Lately, Mr. Ambani's reputation has taken something of a hit with investors. Reliance hasn't been able to produce as much natural gas as it projected from the nation's largest reservoir, denting its profit. And Mr. Ambani has struggled to expand Reliance into consumer markets. Most notably, a vast network of retail supermarkets hasn't fared well, analysts say.
The telecom initiative is a chance for Mr. Ambani to regain momentum, but he is already running into hurdles. The costs of erecting the 4G network are turning out to be far higher than anticipated, especially in sparsely populated areas, people familiar with the project say. Meanwhile, the kind of 4G technology Reliance is using—known as "TD-LTE"—isn't the standard in the U.S. and Europe, so global smartphone makers like Apple Inc.and Samsung aren't yet making devices for it.
It may just be too early: 3G broadband services are still relatively new in India. "The market is not ready for LTE technology," Rajiv Sharma, an analyst at HSBC Holdings PLC, wrote in a report this month.
Yet the 4G rollout has the potential to be a bright spot in a telecom sector that has been weighed down by scandals and regulatory chaos. Reliance's 4G network would be the largest of any outside the U.S. and Japan. India is expected to have more 4G wireless subscribers in four years—37 million—than Brazil, Russia or Indonesia, according to consulting firm Ovum. China is on the 4G path, too, and it is expected to have a much larger user base than India eventually, but it has yet to commence any commercial 4G rollouts.
Only 9% of India's 1.2 billion people now have Internet access, because copper and fiber optic lines don't reach into smaller towns and rural areas. Analysts say that 4G wireless broadband would allow many of the others to get on the Web for the first time, "leapfrogging" over land lines just as many did in the past decade with mobile phones.
"Our digital-services business will revolutionize the lives of millions of Indians by giving them access and opportunities," Mr. Ambani said at Reliance's annual meeting in June, when he announced that the company plans to invest a total of $18 billion in the firm's portfolio of businesses over five years.
"I hope he succeeds," said Arogyaswami Paulraj, a broadband expert at Stanford University. "Wireless broadband can be our virtual infrastructure to some extent mitigate our poor physical infrastructure."
Reliance is hardly new to telecom. In 2002, the company launched a cellular carrier, but a feud between Mr. Ambani and his younger brother, Anil Ambani, following the death of their father that year ultimately forced them to split the company's assets. Anil took the fledgling telecom operation, which is now one of the nation's largest cellphone companies, while Mukesh kept the core energy business.
The brothers agreed in 2005 not to compete on each other's turf, but in May 2010 they canceled that pact, paving the way for the elder Mr. Ambani to pursue his own telecom ambitions. According to one person familiar with the situation, Mukesh has expressed interest in leasing fiber-optic cables from Anil's firm, Reliance Communications Ltd., to support his wireless business. Reliance Communications didn't respond to a request for comment.
Mr. Ambani is taking a strong personal interest in his telecom venture, people familiar with the project say.
In early 2010, Mr. Ambani began coordinating with Mahendra Nahata, the backer of a small telecom firm, Infotel Broadband Services Ltd., to acquire 4G spectrum in a coming government airwaves auction. Infotel's parent company, Himachal Futuristic Communications Ltd.a maker of telecom gear like microwave radios, wasn't in a position to go on a big spending spree. Later that year it reported a net loss of $93 million on $56.5 million in revenue over an 18-month span and said it had cash of $22 million on its books.
But Mr. Ambani promised Mr. Nahata he would back him financially and instructed Infotel to bid as high as necessary to acquire nationwide spectrum, a person familiar with the matter said. The auction began on May 24, 2010. Infotel won large 20-megahertz slices of spectrum in every region of the country. Reliance didn't disclose its role, but on June 11, the day the auction ended, Reliance said it was purchasing a 95% stake in Infotel for $870 million and later paid the $2.3 billion bill for the spectrum Infotel had won. Mr. Nahata couldn't be reached for comment.
The lengthy handwritten notes Mr. Ambani circulated a few months later—which were scanned and sent to some executives from his email account—went into highly technical detail on the telecom venture's potential. They mentioned a ballpark estimate of 60,000 cell towers, though experts say Reliance will likely need many more than that. On one page there was a complex mathematical calculation of how fast each cell tower could carry data.
Elsewhere, there was a list of features that Reliance apparently wanted to provide or facilitate, such as "social network platform" and "education platform." The huge data centers mentioned in the notes would be used to host remote, "cloud based" Web services for businesses, a person familiar with the project said.
The memo also noted the need to "cocreate and innovate with device vendors" as they come up with LTE products. Following up on the memo in a Christmas Day email to Mr. Ambani, an adviser on the 4G project noted that Reliance was aiming to develop an "Apple-like connection manager for all devices for family friendly Internet experience."
The company has also decided it wants to offer traditional cellphone service, a person briefed on the company's plans said. Acquiring an existing carrier is one possible route to accomplish that, and Anil's telecom firm is a candidate, analysts say.
The pressure is on Mr. Ambani to start the rollout soon. Reliance is the only company with a nationwide wireless broadband license, but it will face significant competition.Bharti Airtel Ltd., India's largest wireless carrier, launched 4G service in Kolkata and Bangalore earlier this year, and it is planning more launches soon. Moreover, Mr. Ambani's spectrum license requires that the network reach 50% of rural market areas by 2015.
Edited By Cen Fox Post Team
