Indian mobile operator Videocon Telecom has wasted no time in taking advantage of the government’s decision yesterday to allow spectrum trading, announcing talks with three telcos.
Videocon CEO Arvind Bali said in a statement that the parties are “exploring possibilities around spectrum sharing and trading and now, with the announcement of spectrum trading policy, the discussion will gain momentum and soon we will conclude the pact(s)”.
Bali added that he expects to see other telcos signing spectrum trading pacts soon.
Telecoms minister Ravi Shankar Prasad announced yesterday that the union cabinet had approved spectrum trading guidelines. While the government will retain ownership of the airwaves, operators will not have to seek its permission to trade them.
Gurgaon, Hayyana-based Videocon Telecom, the telecoms arm of conglomerate Videocon Group, says on its website that it provides services in Punjab, Gujarat, Haryana and Madhya Pradesh and plans to expand nationally. It claims to have more than 10 million total subscribers.
In May, Norway’s Telenor was reported to be in talks to acquire a majority stake in Videocon, with Bali acknowledging talks with “international companies” regarding a stake sale. Vivek Sook, CEO of Telenor’s India unit Uninor, has previously described Videocon as a “viable” target.
Fitch Ratings recently noted that Videocon and other smaller telcos were struggling with operating losses and high debt, adding that Tata Telecom and Aircel for example could trade their under-used spectrum in loss-making circles in order to focus on profitable circles.
RCom and Reliance Jio could follow suit
Meanwhile, number four cellco Reliance Communications (NSE:RCOM) and nascent player Reliance Jio are reportedly set to announce a spectrum sharing/trading agreement as soon as next week.
Executives from both operators were scheduled to meet with Department of Telecommunications (DoT) officials today to discuss the alignment of spectrum frequencies, the Economic Times reported. This is expected to be followed by the singing of a spectrum sharing/trading agreement.
RCom, founded by Indian businessman Anil Ambani, declined comment while a spokesperson for Jio, a subsidiary of the conglomerate Reliance Group, was not available.
A spectrum trading agreement would enable RCom to reduce its Rs386bn (US$5.8bn) debt pile, and Jio to amass more spectrum ahead of its commercial launch in December.
In August, the union cabinet announced that telcos would be able to share spectrum in certain circumstances. Shortly afterward, local media reported that RCom and Jio planned to sign a 4G spectrum sharing agreement.
Jio, the first operator to hold a pan-India licence, spent nearly US$2bn in the March spectrum auction, and is widely expected to disrupt the sector.
Fitch noted that RCom and Jio own continuous spectrum in the 800MHz band and have already agreed to share RCom’s towers, as well as inter-city and intra-city fibre networks over the next 17 to 20 years.
The agency considers the new spectrum trading rules credit positive for RCom, since it will be able to reduce leverage by monetising its underused pan-India 800MHz spectrum.
Consolidation on the cards
In addition to easing network congestion, the new rules are widely expected to trigger consolidation.
Fitch Ratings said the three largest cellcos – Bharti Airtel, Vodafone India and Idea Cellular – could boost their 73% combined revenue market share still further by acquiring more spectrum from smaller players, de-congesting their networks and improving their 3G and 4G services.
“Furthermore, the ability to trade spectrum may curtail excessive bidding in future spectrum auctions,” the agency said. “Spectrum trading coupled with sharing will spur consolidation as it provides an exit route to loss-making telcos which have struggled to generate positive operating cash flows.”
