Acquisition to bolster 4G network rollout
In an effort to boost high-speed data rates, India’s third-largest telco, Idea Cellular, agreed to buy nearly $500 million in spectrum from smaller rival Videocon Telecommunications.
The agreement gives Idea the rights to two key spectrum circles in the 1800 MHz band. Idea said it will use the spectrum for LTE deployments in 12 service areas, which covers 72% of the telco’s existing active user base. The company will have the rights to the majority of the spectrum through 2023.
“By first half of 2016, we will be launching our 4G-based services in 750 towns, and by acquiring this spectrum today we will be adding more cities for the launch,” Himanshu Kapania, managing director of Idea Cellular said.
The deal comes on the heels of India’s Department of Telecoms’ new “Guidelines for Trading of Access Spectrum by Access Service Providers” to allow carriers to share spectrum in an effort to improve service for the country’s nearly 1 billion mobile subscribers. Recently, India has been looking for ways to battle call drops and connectivity issues, which have been prevalent due to lack of network capacity.
The agreement is still pending approval from the country’s telecoms department, which requires the completion of “due diligence” on the spectrum blocks. The two companies must then receive written confirmation from the department to move forward with the transaction.
The deal also includes Idea taking over Videocon’s outstanding “deferred payment liability” owed to the telecoms department after its acquisition of spectrum in Gujarat and Uttar Pradesh in the November 2012 Access Spectrum auction. The deal will be funded using Idea’s own cash and debt according to Kapania.
Some analysts believe this is Idea’s attempt to get ahead of Reliance Jio’s ambitious LTE network plans.
Upon completion of the transaction, Idea will take over a full range of mobility services across 2G, 3G and LTE technologies in India’s eight largest markets. Idea currently has approximately 170 million mobile subscribers compared to Videocon’s 7.9 million. Videocon said the proceeds from the transaction will go toward existing telecom business.
