In a bid to compete Reliance Jio’s 4G services and increase network coverage throughout the country, telecom major Bharti Airtel on Thursday struck a deal of Rs4,428-crore to buy Videocon Telecom’s 1,800 megahertz band spectrum in six regions. The six licence areas where Dhoot’s family-owned Videocon had spectrum are Bihar, Haryana, Madhya Pradesh, eastern Uttar Pradesh, western Uttar Pradesh and Gujarat.
The deal comes at a time ahead of Mukesh Ambani-owned Reliance Jio is launching commercial 4G services across the country as it has already got pan-India 4G spectrum and has already launched services on a pilot basis for its employees.
The mega deal also came close on the heels of Idea on Wednesday night announcing calling off its November pact to buy Videocon’s airwaves in Gujarat and UP (West) for Rs3,310 crore. It is expected that the agreement with Videocon will help Airtel strengthen its footprint in 4G space ahead of the launch of Reliance Jio’s fourth-generation wireless services later this year.
“Bharti Airtel has entered into a definitive agreement with Videocon Telecommunications ltd (VTl) to acquire, at an aggregate consideration of Rs4,428 crore, rights to use 2x5 MHz spectrum in 1800 MHz band for six circles,” the company said in a BSE filing, adding that the closing of the transaction is subject to satisfaction of standard conditions.
Airtel is likely to pay about Rs642.06 crore as service tax for the deal to the Government. Announcing the Budget, Finance Minister Arun Jaitley has clarified that right to use spectrum and its subsequent transfer is a service which will attract the Service Tax. Airtel will be buying spectrum for Bihar, Haryana, Madhya Pradesh, UP (East), UP (West) and Gujarat. Videocon had won spectrum in these six circles in the 2012 auctions for Rs2,221.44 crore. The spectrum is valid up to December 18, 2032. Post the deal, Airtel 4G footprint will increase to 19 circles from the current 15.
Airtel has already launched 4G services in over 350 towns across the country. The market for 4G is heating up with telecom operators including Vodafone and Idea expanding their coverage for the high-speed service.
The telecom major took the opportunity when Idea and Videocon had mutually agreed to call off their Rs3,310-crore spectrum deal for Gujarat and UP (West) telecom circles. Idea in November had announced to buy airwaves held by Videocon in these two circles for Rs3,310 crore, which was billed as the first spectrum trading deal of the country.
Speaking on the deal, Gartner Research Director Amresh Nandan said the deal would help Airtel increase their spectrum capacity and another benefit is that with more 1,800 Mhz spectrum coming into their fold across these circles, they will have a better flexibility of spectrum planning across all the three technologies. “There is spectrum auction coming up but it is difficult for anybody to predict what would be the pricing at that point of time. By acquiring the spectrum from Videocon, Airtel has a better control on business plan,” he added.