In a first spectrum trading deal of the country, Idea Cellular today signed a pact with Videocon Telecommunications to buy its airwaves in Gujarat and Uttar Pradesh West for Rs 3,310 crore.
Idea said it intends to use this spectrum for the launch of 4G services in these areas next year.
Along with the right to use spectrum, Idea will also be taking over the outstanding liability of Videocon, which it has to pay to government for these set of airwaves.
Idea Cellular in a statement said it has entered “into an agreement with Videocon Telecommunications Limited (Seller) for acquiring right to use spectrum, pursuant to the DoT ‘Guidelines for Trading of Access Spectrum by Access Service Providers’ (Guidelines) dated October 12, 2015, for the telecom service areas of Gujarat and Uttar Pradesh (West).”
Videocon had acquired spectrum in 1800 Mhz band, known as 2G spectrum, in these two service areas for a total of Rs 1,329 crore in November 2012 and made upfront payment of Rs 438.57 crore to the government.
Videocon Telecom said it also plans to sell spectrum in low-scale operation circles of UP East and Bihar and is seeking a value of Rs 3,500 crore. The company had won spectrum in six circles – UP East, UP West, Bihar, Gujarat, MP and Haryana in the 2012 auctions for Rs 2,221.44 crore.
“The amount of outstanding on the Deferred Payment Liability after repayment of first installment on December 1, 2015 by Seller (Videocon) will be Rs 482.26 crore and this amount plus interest accrued thereon till the date of closing of transaction will be reduced from the payment of the aggregate consideration of Rs 3,310 crores,” Idea said.
“With this spectrum trading arrangement, Idea’s 4G (LTE) spectrum footprint will expand to 12 service areas covering over 75 per cent of Idea’s current revenue and over 72 per cent of existing 170 million quality subscribers,” the statement said.
Idea plans to launch 4G services in 750 towns across existing 10 circles by the first half of calendar year 2016.
“UP East, UP West and Bihar are our low operation circles, and we were looking at exercising Spectrum Trading options. These 3 circles account for approximately 30 per cent of the country’s population and have a low teledensity , hence very high potential,” Videocon Telecom Director and CEO Arvind Bali said.
He said the value of 1800 Mhz spectrum is pegged at around 65 to 70 per cent of the 900 Mhz spectrum, which makes the total value of the spectrum for these circles to be about Rs 10,050 crores.
Of the six circles where Videocon acquired spectrum, it has full-fledged business operations in three circles, which are Madhya Pradesh, Haryana and Gujarat.