 "In battle with Mukesh Ambani’s RJio, what does Airtel gain from Videocon spectrum Idea?")
With the recent acquisition of spectrum in six circles from Videocon, Bharti Airtel has signalled its intent to take on Reliance Jio, which is set to debut its 4G wireless service later this year. (Read here)
Bharti will now be able to offer 4G services in 19 out of the 22 national telecom circles, thereby helping it defend its market-share when R-Jio begins commercial operations.
The Mukesh Ambani-led Reliance Jio has a large bank of spectrum across India and a unified licence, making it the only player that can offer voice telephony along with high- speed data on fourth generation (4G) technology across all 22 circles in the country. In a recent interview with CNN’s Fareed Zakaria, Ambani had hinted at an RJio launch in the second half of this calendar year.
Now, with the Videocon deal, Airtel has positioned itself strongly enough to take on the debutante. Here’s all you need to know about the deal and its implications for the telecom sector.
1) Bharti Airtel paid Rs 4,428 crore to Videocon Telecom for its 1800 MHz spectrum in six circles – Bihar, Haryana, Madhya Pradesh, Uttar Pradesh (East), Uttar Pradesh (West) and Gujarat
2) Videocon, in November 2012, had paid Rs 1,330 crore for the same spectrum. The deal has helped Videocon rake in more than double the amount it had paid, and also indicates how strategic Airtel considers the spectrum to its 4G plan.
3) According to Fitch ratings, Bharti’s acquisition price is about 65% higher than the regulatory auction reserve price — adjusted for the residual life of 16 years.
4) The deal will enable it to offer 4G services in 19 of 22 circles. Its rival, Reliance Jio has plans to offer these services in 22 circles. Idea Cellular, meanwhile, is looking to expand its 4G services to 750 cities across 10 telecom circles by June. Having already covered five circles so far, the company plans to assess the progress and then make a roll out in the remaining 17 circles.
The 1800 MHz has a validity of 16 years — till December 2032. Clearly, this fight is going to be a long, hard one, with both sides eyeing a large chunk of the lucrative data services pie, currently the most profitable offering for telecom providers.
5) Last year, Idea Cellular had agreed to pay Rs 3,310 crore to Videocon for the right to use the spectrum in two circles. The deal was terminated on Wednesday. While it is not clear why the deal fell through, it will be a setback for Idea Cellular, which in December 2015 started offering 4G services in select towns and cities across the four southern states.
6) Vodafone and Idea have 4G spectrum in five and 12 circles, respectively. Vodafone recently launched its 4G services in Mumbai, Bengaluru and Delhi. Post the launch, the company said that it may expand it to other circles based on its ability to acquire the necessary spectrum.
7) The launch of Reilance Jio is expected to upend the industry with its data offerings and budget pricing. The company’s 4G offering will reportedly offer high-speed data, high-definition voice and do real-time video conferencing. The network also offers superior latency for gaming. Analysts have already cautioned stress on telecom sector on the back of this launch.
