Airtel, Vodafone plan to buy Videocon spectrum

Other telcos plan to strengthen their spectrum capabilities in order to meet growth in 4G services and competition from Reliance Jio

Bharti Airtel and Vodafone India might buy additional spectrum in three circles from Videocon due to their acute need of fourth generation (4G) technology based radio waves in Bihar, Uttar Pradesh (UP) East and Haryana circles, rating firm India Ratings said on Monday. Soon after selling spectrum in two circles to Idea last week, Videocon had said it would sell radio waves in its four remaining circles and retain Punjab operations. In a report on Monday, India Ratings said like Idea Cellular, other telecom operators plan to strengthen their spectrum capabilities in order to meet the growth in 4G services and competition from Mukesh Ambani-owned Reliance Jio.

"Therefore, it is possible that Bharti Airtel and Vodafone India may show interest in purchasing spectrum in the circles remaining with Videocon. Videocon has 5 MHz block of spectrum in the 1,800 MHz band in four other circles: Bihar, Haryana, Madhya Pradesh and UP (East). In Bihar and UP (East), Airtel may be a potential buyer of Videocon's spectrum as Airtel's current spectrum is in a block of less than 5 MHz. In Haryana, Vodafone may look to buy Videocon's spectrum for the same reasons," it said. When contacted, Videocon declined to comment on India Ratings statement. Mails to Airtel and Vodafone on the India Ratings statement did not elicit any reply.

Last week, Videocon had sold UP West and Gujarat circles to Idea Cellular at a hefty premium. A top official at Videocon had said the company was in talks with multiple bidders to sell its spectrum in UP (East) and Bihar circles at a valuation of Rs 3,500 crore.

It had said it would also sell spectrum, subscribers and network in Madhya Pradesh and Haryana circles for Rs 4,000 crore by early next year.

In total, the group would raise Rs 14,000 crore by monetising its telecom assets alone, the company had said in a statement. The company has operations in seven circles in India, including in the profit-making Punjab circle.

India Ratings said Idea's purchase of the spectrum was at a significant premium to the last auction discovered price of similar spectrum and it increased its debt by 10 per cent.

If the other telecom players also acquire spectrum at a substantial premium, the debt levels in these companies would increase, it warned. The Indian telecom sector, which is witnessing rising competition in the data space, is likely to take on additional capital expenditure to sustain growth. On Monday, Bharti announced capex of Rs 60,000 crore in the next three years.

"Heightened competitive intensity will also restrict any meaningful pricing improvement for the telecom sector in the near to medium term. At the same time, cash accruals from such investments will be back ended as 4G revenue will gain significance over the next three to five years and therefore could be credit negative in the short term," said the Fitch-owned rating firm.