Airtel to get edge over Jio after Videocon spectrum buy

Once it completes its purchase of Videocon's 4G airwaves in six circles, the country's top mobile operator Bharti Airtel will emerge as the largest high-speed mobile broadband spectrum owner in the country, beating Mukesh Ambani-owned new entrant Reliance Jio Infocomm.

The acquisition of 60 MHz of bandwidth in the six circles will give Airtel a total of 700 MHz or `units' of pan-India 3G/4G spectrum, more than Reliance Jio's 640 units, according to Goldman Sachs.

The deal will also give Airtel 4G LTE capability in all the metros and Category A service areas, and either 3G or 4G presence across all 22 circles, the brokerage said in a note.

"Bharti has the best mix of 3G/4G spectrum, higher than Idea Cellular (402 units), Vodafone India (316 units) and (newcomer) Reliance Jio (640 units), post the transaction with Videocon Telecom," Goldman Sachs said.

Swiss brokerage UBS said Airtel will have "the strongest spectrum bank across incumbents," and command 17 per cent of total spectrum compared with 9.7 per cent of Idea Cellular and 13.5 per cent of Reliance Jio, after it wraps up the deal.

Analysts at JM Financial said Airtel has an edge over Jio since the latter has non-contiguous airwaves in two out of the 18 circles where it holds 1800 MHz spectrum, while Airtel has contiguous airwaves in all 18 circles where it holds spectrum in 1800 MHz band.

Contiguous, or harmonised, airwaves are crucial for telcos to offer quality data services.

Sunil Mittal-led Bharti Airtel had on Thursday announced a pact with Videocon Telecom to buy the latter's 4G bandwidth in the 1800 MHz band in Bihar, UP-East, UP-West, Gujarat, Haryana and Madhya Pradesh for Rs4,428 crore. The buy will boost the telco's 4G footprint across bands to 19 circles from 15, just short of Reliance Jio's holdings across all 22 circles.

The entry of Jio, which is widely expected to launch commercial services next month, is expected to trigger a war for higher-paying data subscribers. Experts say telcos with a wider data spectrum holding will be better placed to ring-fence their user base from any potential attack from new or existing rivals.

Given its expanding bandwidth base, analysts expect Airtel to churn away higher revenue generating data customers from its nearest rivals, Vodafone India and Idea Cellular, especially in the six circles where it is set to buy Videocon's 4G waves. That is because Vodafone has no 4G spectrum in these markets while Idea has 4G spectrum only in two out of the six circles, Goldman Sachs said.

Combined, these six circles account for 25-32 per cent of Bharti's India subscribers and wireless revenues.

UBS said Idea losing out on Videocon's 4G spectrum in UP-West and Gujarat is a marginal negative as the deal would have improved the No 3 carrier's 4G coverage from 61 per cent to 75 per cent of its revenue base. Idea's deal to buy Videocon's airwaves in UP-West and Gujarat was scrapped a day before the Airtel-Videocon pact was announced.

Analysts at Nomura said access to Videocon's 4G spectrum would "improve Bharti's network quality and capacity, and help it improve its market positioning in these circles".