Reliance Borrows $750M for Huawei Gear

Reliance Communications Ltd. (RCom) , India's second largest mobile operator, has scored a $750 million loan from the China Development Bank, in part to bankroll a GSM equipment contract with Huawei Technologies Co. Ltd. as it builds a second mobile network.

According to reports in India's Economic Times and Business Standard, the 10-year loan -- the largest the CDB has granted to an Indian company -- will finance a $500 million to $600 million deal with the Chinese vendor that was awarded several months ago.

Both Huawei and rival Chinese vendor ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) have bagged massive vendor financing deals in emerging markets, including India. (See Vendor Credit Lines Reel in Deals, ZTE Gives Indian Carrier Some Credit, and Give Them Credit: Huawei's Growing .)

Last year Reliance bought $200 million worth of GSM and CDMA gear from the vendor. It said then that Huawei would "play a significant role" in its nationwide CDMA and GSM network expansion. (See Huawei Wins at Reliance.)

Reliance operates India's largest CDMA network and a smaller regional GSM network, and it's received licenses and spectrum for 14 telecom "circles," or service areas, to extend its GSM services nationwide. (See Reliance Gets GSM Spectrum, Reliance Gets GSM Nod, and A Guide to India's Telecom Operators.)

It had a combined 45.8 million mobile subscribers at the end of the first quarter, as Indian operators sign up new customers at a rate of around 10 million every month. (See Reliance Profits Rise 47% and India Crosses 10M Mobile Adds in March.)

The balance of the cash will go toward other GSM orders. The carrier expects to spend $3.3 billion on the network in the current financial year ending March 2009, beginning the rollout by the end of 2008. (See Reliance Updates on Profits, Capex.)

With the licenses and spectrum in hand after a long wait, it’s finally moving forward with plans to award three-year GSM equipment contracts worth at least $6 billion, rivaling state-run BSNL’s recently announced tender for 93 million lines. (See Reliance Plans $7B GSM Build-Out, Reliance Shifts Expansion Strategy, and BSNL Floats New Mega GSM Tender.)

— Nicole Willing, Reporter, Light Reading