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Idea buys Videocon’s 4G spectrum in Gujarat & UP (West) for Rs 3310 Cr

Idea umbrella

Idea Cellular has entered into an agreement to acquire the rights to use spectrum currently with Videocon Telecom in the 1800 MHz band in two key circles – Maharashtra and Uttar Pradesh (West) – for Rs 3310 crore. The right, for 2×5 MHz contiguous blocks of spectrum will be with Idea till December 2032, and essentially amounts to an acquisition of spectrum for Idea. However, the deal will only be applicable after a written confirmation from DoT of the right to use spectrum, and after due diligence done by Idea Cellular. The amount (Rs 3310 crore), includes the payment of Rs 482.26 crores that Videocon Telecom owes the DoT. There is no comparison between the two telecom operators: Idea, with 170 million connections, is over 21 times Videocon, at 7.9 million.

Acquired spectrum for LTE

Idea intends to use this spectrum for deployment of LTE services, and once this deal is done, Idea will be in a position to provide LTE in 12 service areas, covering 72% of its existing active user base, and 75% of its current service area. As per the latest TRAI data, Idea has around 13 million connections in total in UP West, and around 11 million in Gujarat. Videocon has around 30 thousand connections in UP West and 2.4 million in Gujarat.

Idea plans to launch its 4G (LTE) services in 750 towns across existing 10 4G/LTE circles by first half of calendar year 2016, and will introduce 4G/LTE in Gujarat and Uttar Pradesh (West) after the completion of this transaction.

The announcement

Idea Enters into Agreement for Transfer of Right To Use 1800 MHz Spectrum for Gujarat and Uttar Pradesh (West)

Mumbai, 24th November, 2015: Idea Cellular Limited (Buyer) is pleased to enter 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). This agreement for Idea’s two Leadership telecom circles is for a quantum of 2×5 MHz contiguous blocks of 1800 MHz in each service area, with right to use spectrum until December 2032, which Idea Cellular intends to use for deployment of 4G (LTE) services in these service areas. The transaction will be effective only after a) completion of the due diligence related to above spectrum, and b) written confirmation by DoT on the transfer of right to use spectrum to Idea Cellular. Both Companies intend to jointly intimate the ‘Department of Telecommunications’ 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.

The aggregate consideration for the right to use spectrum transaction is Rs. 3,310 crores, which may be subject to adjustment based on the due diligence exercise. 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 December 1, 2015 by Seller will be Rs. 482.26 crores 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 crores payable for right to use the spectrum.

Idea intends to use this acquired spectrum for launch of 4G (LTE) Mobile Broadband Services in the service areas of Gujarat and Uttar Pradesh (West). With this spectrum trading arrangement, Idea’s 4G (LTE) spectrum footprint will expand to 12 service areas covering over 75% of Idea’s current revenue and over 72% of existing 170 million quality subscribers on VLR. These 12 circles currently contribute 60% 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 8 leadership markets of Maharashtra & Goa, Kerala, Andhra Pradesh & Telengana, Madhya Pradesh & Chhattisgarh, Haryana, Punjab, Gujarat and Uttar Pradesh (West). As per the latest TRAI Q2FY16 release in these 8 Telecom service areas, Idea’s combined Revenue Market Share is 30.3% and Subscriber Market Share (on VLR) is 28.6%, a clear No. 1 and dominant Market position. Idea is on track to launch its 4G (LTE) services in 750 towns across existing 10 4G circles by first half of calendar year 2016, and after the completion of this transaction, plans to introduce 4G services in Calendar Year 2016 in Gujarat and Uttar Pradesh (West) Telecom service areas. As per the present spectrum allocation in 1800 MHz and declared usage, Idea will be the first and only operator with liberalised 5MHz contiguous spectrum to launch 4G (LTE) services in the service area of Haryana, and post completion of this transaction, in Uttar Pradesh (West).

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 across 3G and 4G platforms and emerge even stronger.

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