Idea To Buy Spectrum From Videocon For $500Mn
In a massive 4G push, Aditya Birla group led Idea Cellular Ltd has agreed to acquire the right to use spectrum in two service areas from Videocon Telecommunications Ltd for Rs 3,310 crore (approx $500 million). The country’s third-largest telecom operator by subscribers now gears up to launch of 4G (LTE) mobile broadband services in the service areas of Gujarat and Uttar Pradesh (West).
The company will launch its 4G (LTE) services in 750 towns across existing ten 4G circles by first half of calendar year 2016 and after completion of this transaction, plans to introduce 4G services in 2016 for Gujarat and Uttar Pradesh (West) telecom service areas, according to a statement from the company.
As per the present spectrum allocation in 1800 MHz and declared usage, Idea will be the first and only operator with liberalized 5MHz contiguous spectrum to launch 4G (LTE) services in the service area of Haryana and post completion of this transaction in Uttar Pradesh (West, it said. The transaction will be effective only after completion of the due diligence related to above spectrum and written confirmation by Department of Telecommunications (DoT) on the transfer of right to use spectrum to Idea Cellular.
Both companies intend to jointly intimate the DoT for trading the right to use these spectrum blocks as per the Guidelines, after completion of certain aspects of due diligence. The effective date of spectrum trading will not be earlier than 45 days from the date of joint intimation, as defined in Guidelines.
Along with the right to use spectrum, Idea will also be taking over the outstanding ‘Deferred Payment Liability’ of Videocon Telecommunications Ltd., payable to the DoT, in respect of the spectrum being acquired for service areas of Gujarat and Uttar Pradesh (West) in the November 2012 Access Spectrum auction.
“The amount of outstanding ‘Deferred Payment Liability’ after repayment of first instalment on 1 December 2015 by Seller will be Rs.482.26 crore and this amount plus interest accrued thereon till the date of closing of transaction (as contemplated in the said agreement) will be reduced from the payment of the aggregate consideration of Rs.3,310 crore payable for right to use the spectrum,” the company 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 on VLR. These 12 circles currently contribute 60 per cent of the Indian telecom industry mobility revenues.
After completion of this transaction, Idea would have full range of mobility services across 2G (GSM), 3G (HSPA) and 4G (LTE) technologies in all of its eight leadership markets of Maharashtra and Goa, Kerala, Andhra Pradesh and Telangana, Madhya Pradesh and Chhattisgarh, Haryana, Punjab, Gujarat and Uttar Pradesh (West).
“UPE, UPW & Bihar are our low operation circles, and we were looking at exercising Spectrum Trading options. We are in active discussions with operators for UPE and Bihar to exercise spectrum trading option, and we are looking at valuation of at least Rs 3,500 Cr considering the potential,” Arvind Bali, Director and CEO Videocon Telecom said in the statement.
As per the latest TRAI Q2FY16 release in these eight telecom service areas, Idea’s combined revenue market share is 30.3 per cent and subscriber market share (on VLR) is 28.6 per cent, a clear No. 1 and dominant market position.
The company is confident that with this expansion of its spectrum portfolio, strong customer affinity of over 170 million customers, robust cash flows and excellent track record of execution, the brand will be able to profitably monetize the opportunities in mobile broadband across 3G and 4G platforms and emerge even stronger.
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