Airtel’s acquisition of Aircel’s broadband spectrum has clearly drawn the battle lines in the upcoming 4G war.
While Reliance Jio was the only operator with pan-India 4G spectrum until now, a series of acquisitions over the past few years has catapulted Airtel from a four-circle player to one with broadband spectrum across all the 22 circles in the country.
“Since market was worried about RJio having a lot of spectrum. it will reward Airtel for this acquisition. So now only Bharti and RJio have the real muscle power,” said GV Giri, Telecom Analyst at India Infoline.
Airtel had initially acquired four circles through the auction in 2010 for ₹3,314 crore. Reliance Jio had acquired 4G spectrum across all the circles for little over ₹12,800 crore. Then Airtel acquired four more circles from Qualcomm in 2013, for undisclosed amount, taking the 4G footprint to 8 circles. Qualcomm had paid ₹4,912 crore for the airwaves so it is unlikely that Airtel would have paid more than that. Earlier this month, Airtel bought spectrum in six more circles from Videocon for ₹4,428 crore, which was twice of what Videocon paid while buying through the auction. That’s because Videocon had spectrum in the comparatively more efficient 1800 MHz frequency band.
Airtel has now acquired eight circles more from Aircel almost at the same price as what the latter had paid for it in 2010. Aircel had acquired spectrum in the 2300 MHz for ₹3,438 crore and has sold it for ₹3,500 crore five years later. According to Giri, the deal is fairly priced accounting for inflation at the rate of 7 per cent or so.
While Airtel can rejoice over the acquisition, the deal could also trigger a mega alliance between rival operators. “Aircel could settle some of its ₹20,000- crore debt with the deal money, which would make it more suitable for a merger with the Reliance Communications-MTS combine. This merged entity could then provide the fuel for Reliance Jio’s telecom juggernaut,” said a telecom analyst.
RCom, backed by Anil Ambani, has an agreement with Mukesh Ambani’s Reliance Jio for spectrum sharing. Post the deal with Airtel, Aircel is still left with valuable spectrum for 2G, 3G and 4G services. In addition, the RCom-MTS combine will have a strong portfolio of broadband-capable airwaves. All of this can be used by RJio to take on Airtel.
“4G services will be consumed by high-end users initially. They will move to the operator which has the highest quality so telcos are rushing in to acquire more spectrum to take the first mover advantage in this space,” said Prashant Singhal, Global Telecommunications Leader, EY.