Videocon Telecommunications cashes in on spectrum scarcity, will do so again

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Published: November 27, 2015 1:10:16 AM

On November 24, when Videocon Telecommunications sold its 5 MHz spectrum in Gujarat and Uttar Pradesh (West) to Idea Cellular for Rs 3,310 crore...

Videocon, Videocon D2h, Videocon D2H stake sellIf an operator has to get 4G spectrum in these circles in the 1800 MHz band, they have no other option but to buy it from Videocon. (Courtesy: Videocon)

On November 24, when Videocon Telecommunications sold its 5 MHz spectrum in Gujarat and Uttar Pradesh (West) to Idea Cellular for Rs 3,310 crore, a premium of 98% over the March 2015 auction price of Rs 1,669.75 crore and 149% of what it had paid in the November 2012 auction for it, the former’s CEO Arvind Bali said that the company expects to sell its spectrum in Bihar and UP (East) even at an even higher price of R3,500 crore, reports fe Bureau in New Delhi.

There’s a reason behind Bali’s confidence. In Bihar and UP (East), none of the three top operators — Bharti Airtel, Vodafone and Idea currently have the ability to offer 4G services.

The only option before them, thus, is to buy spectrum from Videocon and since the three will compete to grab it, prices will soar. The only other option for them to get 4G spectrum is if the department of telecommunications (DoT) provides a clear roadmap to offer fresh spectrum in the 1800/2100/2300 MHz band or Tikona and Aircel decide to sell their existing 2300 MHz spectrum. At the moment, there’s not much happening on either front.

As it is, Bharti Airtel, Vodafone and Idea are competing with each other in the six circles — UP (East), UP (West), Bihar, Gujarat, MP and Haryana — where Videocon has 5 MHz of contiguous spectrum in the 1800 MHz band. The company had paid Rs Rs 2,221.44 crore for it in the November 2012 auction.

By buying the spectrum in Gujarat and UP (West), Idea has solidified its position to offer 4G services and protect its revenue market share (RMS). In both these circles, the company’s RMS is 20% (rank 2) and 31% (rank 1), respectively. Idea bought the spectrum in both these circles at a huge premium because it does not want to face the risk of facing a fresh auction, where the price could be even higher due to the huge uncertainty in availability of 4G spectrum.

Going ahead, Bharti and Idea have the capability to roll out 4G in only two (Haryana and MP) of the six circles where Videocon has 5 MHz of 4G spectrum in the 1800 MHz band. This is because Bharti, Vodafone and Idea need some spectrum to offer GSM services or their spectrum being fragmented and, therefore, not suitable for 4G. Hence, if an operator has to get 4G spectrum in these circles in the 1800 MHz band, they have no other option but to buy it from Videocon. The other option is that the DoT completes the harmonisation process of the 1800 MHz band and releases additional spectrum through fresh auctions.

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