Spectrum-trading pact: Airtel monetises unused airwaves, Jio saves $400m

The first spectrum-trading pact between Reliance Jio and Bharti Airtel allows the Sunil Mittal-led telco to monetise unutilised airwaves and, at roughly half the auction price, saves the Mukesh Ambani-owned operator some $400 million while beefing up its holdings in three circles.

Market leader Jio said on Tuesday it acquired the right to use 800 MHz spectrum from No. 2 telco Bharti for roughly Rs 1,500 crore, including Rs 459 crore in future spectrum-related liabilities.

“The agreement also highlights that Jio and Airtel can work together for a mutually beneficial cause (contrary to general perception), suggesting slight moderation of competitive dynamics,” Credit Suisse said in a note.


Airtel shares gained 1.8% to Rs 541.50 at the close on the BSE on Wednesday. Airtel received the 800 MHz spectrum in Andhra Pradesh, Delhi and Mumbai when it acquired the consumer wireless business of Tata Teleservices in 2019. The airwaves were unutilised since they were below the requisite block of 5 MHz needed for 4G use. The pricey spectrum has a validity of 14 years.

The deal has helped Jio, the only user of 800 MHz spectrum in all 22 circles, to top up its holdings in the three circles for a total consideration of Rs 14.97 billion, UBS said in a report on Wednesday. “With remaining validity of 14 years, the implied cost/MHz/annum comes to Rs 140 million, a 50% discount to the auction price. Jio has therefore not only built up 10-15 MHz blocks in these key circles, but has potentially saved $400 million,” UBS said.

Airtel, which was unable to unlock any value from the unutilised spectrum, will receive Rs 1,040 crore in cash and its spectrum liability will reduce by Rs 459 crore with Jio assuming future liabilities of the spectrum payment, Credit Suisse said in a report.

“The three service areas of Delhi, AP and Mumbai account for 17% of gross revenues for Jio and has gross revenue market share of 32%/40% and 31%, respectively. Jio occupies second-highest gross revenue market share in AP and Delhi service areas (behind Airtel) and ranks third in Mumbai service area, behind VIL and Airtel,” Credit Suisse said. Airtel now has sub-1 GHz network across India with at least 2x5.0MHz of sub-1 GHz spectrum in all service areas, strengthening the company’s network coverage, it added.