 "Idea buys Videocon's spectrum for Rs 3,310 cr")
In India’s first telecom spectrum trading transaction, Videocon Telecommunications, a subsidiary of Videocon Industries, on Tuesday sold its spectrum in Gujarat and UP (West) circles to Aditya Birla group’s Idea Cellular at a valuation of Rs 3,310 crore.
A top official of Videocon said the company was also in talks with multiple bidders to sell its spectrum in UP (East) and Bihar circles at a valuation of Rs 3,500 crore. It will 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 said in a statement. The firm has operations in seven circles in India, including in the profit-making Punjab circle.
In a statement, Idea Cellular said it would use the spectrum bought on Tuesday to roll out its fourth generation-based telecom services in the next few months. Idea said the spectrum was valid till December 2032 and the transaction would be effective only after completion of due diligence and clearance from the department of telecom.
Idea will also be taking over the outstanding “deferred payment liability” worth Rs 482 crore of Videocon Telecommunication payable to DoT for the two circles. This payment will be deducted from the payment to be made to Videocon.
Himanshu Kapania, MD of Idea Cellular said the transaction will help Idea to increase its 4G footprint in 12 key circles which contributes 62 per cent of its revenues and caters to 170 million customers. “We will fund the transaction with our own cash and debt. Idea generated close to Rs 5,000 crore in cash in the first half of the current fiscal part of which will be used for this transaction," Kapania said.
After completion of the transaction, Idea would have full range of mobility services across 2G (GSM), 3G and 4G (LTE) based technologies in all of its 8 leadership markets of Maharashtra & Goa, Kerala, Andhra Pradesh and Telengana, Madhya Pradesh & Chhattisgarh, Haryana, Punjab, Gujarat and Uttar Pradesh (West). “By first half of 2016, we will be launching our 4G based services in 750 towns and by acquiring this spectrum today, we will be adding more cities for the launch,” said he. Analysts said the imminent launch of Reliance Jio’s 4G services has made Indian telecom like Idea to upgrade their networks and offer 4G services to their customers before Jio.
On Tuesday, Videocon’s shares closed two per cent down at Rs 130 a share while Idea Cellular closed flat at Rs 139 a share. The announcement was made by both companies after trading hours.
When contacted, Chairman of Videocon Group, Venugopal Dhoot said some of the proceeds of the transaction would be used in the existing telecom business.
Videocon had acquired the spectrum last year in an auction after the Supreme Court cancelled its nationwide telecom licences due to the 2G scam, which singed the entire telecom industry.
Dhoot said the group’s telecom business was fast turning around with Madhya Pradesh and Haryana. Its market share in Haryana is at 9.1 per cent with 2.1 million subscribers, while in Madhya Pradesh (MP), its customer market share is 5.3 per cent with 3.3 million subscribers.
“We will be Ebitda (earnings before interest, tax, depreciation and amortisation) positive in Haryana by next month, and by the end of the current financial year, we will be able to deliver Ebitda positive in MP circle also,” he said.
“Our first and foremost objective for these circles will now be to rollout next-generation data service in order to stay competitive in the fast-changing market dynamics. We are in active discussion with other operators to exercise spectrum sharing option for rollout of 4G services. Broadly, we plan to move our second generation-based voice and data to partner operator and rollout 4G services on our spectrum and share the same,” he said.
On his plans for Punjab GSM business, Dhoot said the company has achieved one of the fastest Ebitda positive milestones in Punjab in the telecom sector. “Our market share in Punjab is 9.2 per cent, and we plan to offer 3G services with one of the partner telcos soon,” said Dhoot.
The move to sell spectrum or radiowaves (used for wireless telephony and data transfer) by Videocon is part of the group’s strategy to reduce its debt worth Rs 39,154 crore as on December last year to more manageable levels. In January 2014, the company had sold its Mozambique-based gas fields to ONGC and Oil India for $2.5 billion.
The group has also finalised sale of part of its stake in insurance joint venture (JV) to its partner Liberty Mutual at a valuation of Rs 8,000 crore for the entire JV. Besides, it has lined up real estate worth Rs 5,000 crore for sale in India.
WIN-WIN DEAL
Videocon Telecom gets Rs 3,310 crore for two circles
Videocon to monetise telecom assets worth Rs 14,000 crore
MP, Haryana, UP (East) and Bihar in queue for sale
Deal to help Videocon cut debt
Idea Cellular gets 5 MHz contiguous spectrum till December 2032
Easier for Idea to roll out 4G services with 1,800-MHz spectrum
Idea 4G footprint to increase to 12 key circles
Idea’s 170-million customers will get access to 4G services
RECENT TELCO DEALS
RCom, on November 2, announced takeover of Sistema’s Indian mobile telephony venture that operates under the MTS brand. Sistema is to receive 10% stake in RCom
Tata Teleservices is reportedly in talks with Telenor for a merger
