Bharti Airtel acquires spectrum rights from Aircel for $525M
Reuters | Photo Credit: Reuters

Bharti Airtel Ltd has signed a Rs 3,500-crore ($525 million) spectrum trading deal with smaller rival Aircel Ltd to expand its fourth-generation (4G) mobile-phone services across India, as it readies for an intense battle for data users with billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd.

This is the second such deal struck by India's largest mobile-phone operator within a month. In March, Bharti Airtel inked a Rs 4,428-crore ($660 million) spectrum trading deal for six telecom service areas with Videocon Telecommunications Ltd. That deal had come just hours after Idea Cellular Ltd scrapped a similar but smaller pact with the same operator.

Bharti Airtel and unit Bharti Hexacom Ltd will acquire the rights to use 20 megahertz of 4G spectrum in the 2300 Mhz band from Aircel and its subsidiaries Dishnet Wireless Ltd and Aircel Cellular Ltd in eight telecom service areas. The eight areas, or circles in industry parlance, are Tamil Nadu, Bihar, Jammu and Kashmir, West Bengal, Assam, Andhra Pradesh, Orissa and the northeastern region. The spectrum is valid until September 2030, the billionaire Sunil Bharti Mittal-led company said in a statement.

The development indicates the stiff fight for spectrum that can be used for high-speed 4G data services ahead of the impending nationwide launch of Reliance Jio. Most top Indian telecom operators are focusing on data to boost revenue as income from voice calls stagnates. Bharti Airtel was first off the block in rolling out 4G services while the local arm of Vodafone Group Plc has also started 4G operations.

Both Bharti and Vodafone, as well as No.3 Idea and other telecom carriers, face a major threat from Reliance Jio. The Mukesh Ambani-led company was the only one to win 4G spectrum across India in a 2010 government auction of airwaves, but Bharti’s twin deals will give it an upper hand and help it defend its leadership position.

The spectrum trading deals come after the government in October last year changed rules to allow buying and selling of airwaves.

Bharti Airtel has acquired companies previously also to expand its data services. In August last year, it agreed to buy Augere Wireless Broadband India Pvt Ltd for an undisclosed amount. In 2013, it completely acquired the Indian wireless broadband venture of Qualcomm, which had broadband licences for Delhi, Mumbai, Haryana and Kerala, for an undisclosed amount.

Bharti Airtel provided 4G services in 14 circles as of December 31, the company said in January when it announced its quarterly results.

India's telecom market is divided into 22 circles that mostly coincide with states, but some large markets are divided further and some smaller ones are clubbed together.

Idea has 4G spectrum in 10 telecom service areas, or circles in industry parlance. The deal with Videocon, one of the country's smallest telecom operators, would have expanded Idea’s 4G spectrum footprint to 12 circles.

For Aircel, the deal comes at a time when it is already in merger talks with Reliance Communications Ltd. Last month, Anil Ambani-led Reliance Communications said it had extended the exclusivity period of merger talks with Aircel shareholders by two months to May 22. Reliance Communications last year agreed to acquire the wireless business of Sistema Shyam Teleservices Ltd, which operates under the MTS brand, in a deal that marked the first consolidation in the telecom sector since 2009.

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