Videocon Telecom to sell spectrum to Idea Cellular in 2 circles for Rs 3310 crore

KOLKATA/MUMBAI: Idea Cellular will buy Videocon Telecom’s spectrum in the Uttar Pradesh (West) and Gujarat circles for Rs 3,310 crore (about $500 million) in the country’s first such trading deal as the No. 3 carrier gears up to launch 4G services and take on rivals such as Reliance Jio, Bharti Airtel and Vodafone.

The Aditya Birla Group company said it intends to use the total 10 MHz of airwaves in the 1800 MHz band acquired from Videocon for 4G in the two regions. Videocon’s permits for the spectrum expire in 2032. As the first officially announced spectrum trading deal in India, this could mark the beginning of a long-awaited consolidation in the market.

It also sets a benchmark for 1800 MHz spectrum price. Reliance Jio and Reliance Communications have officially confirmed sharing and trading talks. ET had earlier reported that Bharti Airtel was in negotiations to buy Aircel’s 4G spectrum through a trading deal. Both deals haven’t yet been announced.
The (Idea-Videocon) deal will go through on completion of due diligence and written confirmation from the Department of Telecommunications (DoT) on the transfer of rights to use the frequencies, Idea said in a statement.

The company, about a fifth owned by Malaysia’s Axiata, and Videocon will shortly inform DoT on "trading the right to use these spectrum blocks" in step with recently announced guidelines following completion of certain aspects of due diligence.

Idea has 4G airwaves in seven circles. The telecom arm of the Venugopal Dhoot-led Videocon Group holds liberalised and contiguous airwaves in the 1800 MHz band in UP (East), UP (West), Bihar, Gujarat, Madhya Pradesh and Haryana.

The country’s top GSM telcos — Airtel, Vodafone India and Idea Cellular — are bracing for a battle over higher-paying data subscribers with Reliance Jio, which is set to launch 4G services in December. Reliance Jio is in advanced talks with Reliance Communications to trade and share airwaves for its high-speed services. Given the plateauing of voice revenue and spurt in mobile data, the success of telecom operators in the 3G and 4G space will be decisive.

The Idea-Videocon deal is the first off the mark since trading deals were notified in mid-October. Idea said it would also be taking over Videocon Telecom’s liabilities with respect to the airwaves.

"The amount of outstanding ‘deferred payment liability’ after repayment of the first installment on December 1, 2015, by the seller (read: Videocon) would be Rs 482.26 crore, and this sum plus interest accrued thereon till the date of closing of transaction (as contemplated in the said agreement) would be reduced from the payment of the aggregate consideration of Rs 3,310 crore payable for right to use the spectrum," Idea said.

With this deal, Idea’s 4G spectrum footprint will expand to 12 circles covering more than 75 per cent of its current revenue and over 72 per cent of existing 170 million subscribers on the voice location register, or VLR. These 12 circles contribute 60 per cent of the telecom industry’s mobility revenue.

Bharti Airtel has already rolled out 4G high-speed broadband services in over 300 towns and cities while Reliance Jio is expected to launch in late December, as is Vodafone. Idea, which was forced to advance plans for its 4G launch, said it is on track to begin services in 750 towns in 10 circles by the first half of calendar 2016. After completion of the transaction, it plans to introduce 4G services next year in Gujarat and UP (West).

Hemant Joshi, partner at Deloitte Haskins & Sells LLP, said the trading pact is positive for both sides.