Idea Cellular on Tuesday agreed to acquire spectrum from Videocon for 33.1 billion rupees (€469.5 million), a deal that will put India’s recently-enacted spectrum trading rules to the test.
Under the proposed transaction, Videocon will transfer its 1800-MHz spectrum in the Gujarat and Uttar Pradesh telecom circles to Idea, which will have the right to use it until December 2032.
"Idea intends to use this acquired spectrum for [the] launch of 4G mobile broadband services in the service areas of Gujarat and Uttar Pradesh (West). With this spectrum trading arrangement, Idea’s 4G spectrum footprint will expand to 12 service areas covering over 75% of Idea’s current revenue and over 72% of [its] existing 170 million quality subscribers," said Idea, in a statement.
The telco said it plans to launch 4G services in 750 towns across 10 telecom circles by the first half of calendar 2016. It expects to be able to deploy 4G on the spectrum acquired from Videocon at some point next year.
In addition to the INR33.1 billion purchase price, Idea will also pay off the remaining INR4.8 billion (€68.3 million) of instalments still owed by Videocon to the Department of Telecommunications (DoT) for the spectrum that Idea has agreed to acquire.
The deal will put to the test the spectrum trading laws approved by the Indian government in September. While operators don’t have to seek government permission before agreeing a deal, they are required to inform the government 45 days in advance of a trade.
The aim is to enable capacity-constrained mobile operators to ease the strain on their networks and to help strugglin g telcos sell their spectrum and exit the market.
Tuesday’s transaction will be effective upon completion of due diligence and receipt of approval from the DoT, Idea said, adding that the effective date will not be earlier than 45 days from the date it informed the government.
"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 monetise the opportunities in mobile broadband," Idea said.
