India’s third largest mobile operator Idea Cellular has agreed to buy the rights to spectrum in two service areas from smaller rival Videcon Telecom for Rs33.10bn (US$499m). The operator hopes the deal will help it in the race to roll out 4G services.
India’s third largest mobile operator Idea Cellular (NSE:IDEA) has agreed to buy the rights to spectrum in two service areas from smaller rival Videcon Telecom for Rs33.10bn (US$499m).
Idea will obtain the right to use contiguous spectrum blocks in the 1800 MHz band in Gujarat and Uttar Pradesh (West) until December 2032, the operator said in a statement. The price is subject to due diligence.
An outstanding Rs4.82bn (US$73m) ‘deferred payment liability’ owed by Videocon to the Department of Telecommunications (DoT) in respect to the spectrum, which it acquired in the November 2012 auction, will be deducted from the final price tag, plus interest accrued before closing.
The sale comes some two and a half months after the government gave the green light to spectrum trading, saying it believed it would boost competition, improve service quality and improve the business environment.
Idea, which says it has an 18.5% market share in terms of revenues and some 170 million customers, will use the new spectrum to roll out 4G mobile broadband services in the two areas as the country’s already fiercely competitive telecoms sector looks set to become tougher still. Largest player Bharti Airtel is already offering 4G in several service areas and Vodafone, the number two cellco, plans to start rolling out in December. Billionaire Mukesh Ambani’s 4G upstart Reliance Jio had planned to launch in December, before pushing the date back to spring 2016. Idea aims to extend 4G to 750 towns in 10 service areas by the first half of 2016.
The transaction will not be effective until due diligence is complete and the DoT confirms the transfer in writing. The parties intend to notify the DoT of the deal following due diligence and, in line with department guidelines, the trading date will be at least 45 days after notification.
Idea said that following completion, its footprint will cover 12 service areas, which currently contribute more than 75% of its total revenues. It will have a full range of 2G, 3G and 4G services in its eight key markets: Maharashtra and Goa, Kerala, Andhra Pradesh and Telengana, Madhya Pradesh and Chhattisgarh, Haryana, Punjab, Gujarat and Uttar Pradesh (West).
Videocon, the tenth of India’s 12 MNOs, had been looking to sell spectrum to tackle a debt pile which stood at Rs225bn (US$3.47bn) as of September. In mid-October, the Economic Times reported that parent Videocon Industries(NSE:VIDEOIND) was c