Idea Cellular Ltd, India’s third-biggest mobile phone operator, has agreed to buy radio airwaves in two services areas from smaller rival Videocon Telecommunications for Rs 3,310 crore to boost its high-speed data services.
The deal comes a month after the government allowed carriers to trade mobile airwaves, a move aimed at improving services in the world’s second-biggest market by number of mobile customers.
India’s increasingly congested airwaves have resulted in problems like calls getting cut in the middle of conversations and connectivity issues, even as more and more users hook on to the Internet from their phones and tablets.
The number of smartphone users in India stood at around 140 million in 2014. It is expected to reach 651 million by 2019, according to a study by Cisco.
Idea, a unit of the Aditya Birla conglomerate and nearly a fifth-owned by Malaysia’s Axiata, plans to use the acquired spectrum for launching 4G broadband services in Gujarat and Uttar Pradesh (west), the company said in a statement.
This is first such spectrum sale in the country. Along with the right to use spectrum, Idea will also be taking over the outstanding liability of Videocon, which it has to pay to government for these set of airwaves.
Idea Cellular in a statement said it has entered “into an agreement with Videocon Telecommunications Limited (Seller) for acquiring right to use spectrum, pursuant to the DoT ‘Guidelines for Trading of Access Spectrum by Access Service Providers’ (Guidelines) dated October 12, 2015, for the telecom service areas of Gujarat and Uttar Pradesh (West).”
Videocon had acquired spectrum in 1800 Mhz band, known as 2G spectrum, in these two service areas for a total of Rs 1,329 crore in November 2012 and made upfront payment of Rs 438.57 crore to the government.
Videocon Telecom said it also plans to sell spectrum in low-scale operation circles of UP East and Bihar and is seeking a value of Rs 3,500 crore. The company had won spectrum in six circles – UP East, UP West, Bihar, Gujarat, MP and Haryana in the 2012 auctions for Rs 2,221.44 crore.
“The amount of outstanding on the Deferred Payment Liability after repayment of first installment on December 1, 2015 by Seller (Videocon) will be Rs 482.26 crore and this amount plus interest accrued thereon till the date of closing of transaction will be reduced from the payment of the aggregate consideration of Rs 3,310 crores,” Idea said.
“With this spectrum trading arrangement, Idea’s 4G (LTE) spectrum footprint will expand to 12 service areas covering over 75 per cent of Idea’s current revenue and over 72 per cent of existing 170 million quality subscribers,” the statement said.
Idea plans to launch 4G services in 750 towns across existing 10 circles by the first half of calendar year 2016.
“UP East, UP West and Bihar are our low operation circles, and we were looking at exercising Spectrum Trading options.
These 3 circles account for approximately 30 per cent of the country’s population and have a low teledensity , hence very high potential,” Videocon Telecom Director and CEO Arvind Bali said.
He said the value of 1800 Mhz spectrum is pegged at around 65 to 70 per cent of the 900 Mhz spectrum, which makes the total value of the spectrum for these circles to be about Rs 10,050 crores.
Of the six circles where Videocon acquired spectrum, it has full-fledged business operations in three circles, which are Madhya Pradesh, Haryana and Gujarat.
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