Technoglitch
Core Member
Last November, when Idea Cellular Ltd agreed to pay top dollar for Videocon Telecommunications Ltd’s spectrum, it looked like the much-awaited consolidation in the industry was becoming a costly exercise. But Idea Cellular has walked out of the deal, and while Videocon has found another buyer in Bharti Airtel Ltd, valuations have come crashing down.
It’s premature to conclude that rationality has returned to the industry. Even so, the Videocon deal has some heartening takeaways—of course, for everyone except Videocon. The delay in Reliance Jio Infocomm Ltd’s launch means companies can breathe a bit easier. And the likelihood that the government will harmonize spectrum in 1800 megahertz (MHz) band before this year’s auction means that this resource may not be as scarce as was earlier feared.
Another way to look at the deal is that Bharti Airtel is acquiring the spectrum at 34% of the last discovered price for 900MHz spectrum in these circles, whereas Idea Cellular had agreed to pay as much as 55% for the two circles it had agreed to buy. According to analysts at JM Financial Institutional Securities Ltd, the price of “1800 relative to the price of 900” was 35% in A-category circles and 47% in metro circles in the March 2015 auctions. Bharti Airtel, therefore, appears to have struck a reasonable deal, especially keeping in mind that the entire spectrum is contiguous and hence suitable for deploying 4G services. The six circles contribute to 23% of Bharti Airtel’s revenue. Also, it will now have 4G spectrum in 19 circles, versus 15 earlier. “Bharti’s 4G-1800 spectrum footprint is now slightly better than that of Reliance Jio”, JM Financial’s analysts wrote in a 17 March note.
Airtel’s spectrum deal good for all except Videocon - Livemint
It’s premature to conclude that rationality has returned to the industry. Even so, the Videocon deal has some heartening takeaways—of course, for everyone except Videocon. The delay in Reliance Jio Infocomm Ltd’s launch means companies can breathe a bit easier. And the likelihood that the government will harmonize spectrum in 1800 megahertz (MHz) band before this year’s auction means that this resource may not be as scarce as was earlier feared.
Another way to look at the deal is that Bharti Airtel is acquiring the spectrum at 34% of the last discovered price for 900MHz spectrum in these circles, whereas Idea Cellular had agreed to pay as much as 55% for the two circles it had agreed to buy. According to analysts at JM Financial Institutional Securities Ltd, the price of “1800 relative to the price of 900” was 35% in A-category circles and 47% in metro circles in the March 2015 auctions. Bharti Airtel, therefore, appears to have struck a reasonable deal, especially keeping in mind that the entire spectrum is contiguous and hence suitable for deploying 4G services. The six circles contribute to 23% of Bharti Airtel’s revenue. Also, it will now have 4G spectrum in 19 circles, versus 15 earlier. “Bharti’s 4G-1800 spectrum footprint is now slightly better than that of Reliance Jio”, JM Financial’s analysts wrote in a 17 March note.
Airtel’s spectrum deal good for all except Videocon - Livemint
