Bharti Airtel and Reliance Jio on Friday concluded a Rs 1,004.8-crore spectrum trading deal under which Jio will get the right to use Airtel’s 800 Mhz spectrum in the Andhra Pradesh, Delhi, and Mumbai circles.
“Airtel has received Rs 1,004.8 crore (net of tax) from Jio for the proposed transfer. In addition, Jio will assume future liabilities of Rs 469.3 crore relating to the spectrum,” the telecom operator said in a statement.
Bharti Airtel’s deal with Reliance Jio involves the transfer of the “right to use” of Airtel’s 800 Mhz spectrum in Andhra Pradesh (3.75 Mhz), Delhi (1.25 Mhz) and Mumbai (2.50 Mhz) circles to Jio, the companies had said earlier this year.
“The sale of the 800 Mhz blocks in these three circles has enabled us to unlock value from spectrum that was unutilised. This is aligned to our overall network strategy,” said Gopal Vittal, managing director and chief executive officer (India and South Asia), Airtel.
According to analysts, the trading of unutilised spectrum can help the companies earn revenue, and in return provide better network reach to customers across the country.
After the two firms had agreed on the spectrum sale, market analysts had termed the deal “mutually beneficial” and a “win-win for both”.
UBS in a note cited Jio’s spectrum buys in the 800 Mhz band in the recently-concluded auctions.
Going by the total purchase cost of Rs 13,500 crore and given the 20-year validity, it works out to a cost/MHz/annum of Rs 30 crore.
India's largest telecom operator Reliance Jio through the deal with Bharti has now topped up its holding in these circles to 10MHz, 10MHz and 15MHz, respectively, for a total consideration of Rs 1,497 crore.
“With remaining validity of 14 years, the implied cost/MHz/annum comes to Rs 140 million...50 per cent discount to the auction price. Jio has therefore not only built up 10-15 MHz blocks in these key circles but has potentially saved USD 400 million," UBS said.
The deal makes sense for Bharti as this spectrum was acquired by Airtel from Tata for little consideration, and has remained unutilised. Bharti is, therefore, able to unlock value from the unutilised spectrum, UBS note explained.