Reliance Jio-RCom sign spectrum sharing, trading pacts

Tuesday, Jan 19, 2016

Reliance Jio Infocomm and Reliance Communications have signed spectrum trading and sharing agreements, moves that will help the combination leverage each other's airwaves to launch 4G services across India.

This marks a much-anticipated union between the Ambani brothers that will pit them against top telcos Bharti Airtel, Vodafone and Idea Cellular. Jio's board separately approved the raising of Rs 15,000 crore through a rights issue to existing shareholders on Monday. Jio is a wholly owned unit of Reliance Industries. Anil Ambani-owned RCom will sell its airwaves in the 800 Mhz band in nine service areas to Jio — owned by elder brother Mukesh — where the latter doesn't have spectrum in that band. In 17 circles, the two companies will share airwaves, the carriers said in a joint statement on Monday. The two companies have also agreed on intra-circle roaming agreements, which will enable users in the same service area to use the two networks interchangeably.]

RCom is set to get around Rs 4,500 crore by trading its airwaves to Jio, which the company will use to pay the telecom department (DoT) most of the .`5,384 crore it needs for liberalising its airwaves in 16 circles. The balance will be paid from the proceeds of the recent real estate asset sale deals that RCom has struck, sources said. Liberalising refers to allowing the use of spectrum for any telecom-related activity, not just what it was allocated for.

"The spectrum arrangements between RJIL and RCom will result in network synergies, enhanced network capacity and will optimise spectrum utilisation and capex efficiencies. Both operators anticipate considerable savings in operating costs and future investment in networks," the statement said.

ET was the first to report on the sharing and trading pacts in its August 14, 2015, edition. Two weeks after that, Anil Ambani had confirmed that India's fourth-largest telecom company was in advanced talks to share and trade spectrum with Jio.

The announcement didn't seem to enthuse investors - RCom dropped 3% to .`70.70 - with experts saying the deal had already been priced in. Reliance IndustriesBSE 2.51 %, Jio's parent, ended the day 5% down at Rs 1,016.85 as the broader market fell 1%.

Market leader Bharti Airtel was first off the blocks on 4G and is offering services in more than 350 towns and cities. Vodafone India and Idea have already launched their own 4G high-speed broadband services in select circles, while Jio is expected to launch its 4G operations in March-April, having soft launched with employees late December. Sources said RCom is also expected to launch its own 4G offerings in tandem with Jio's commercial launch.

Jio and RCom are likely to extend their sharing partnership to all 22 service areas once the government arrives on a price to liberalise airwaves in Rajasthan, Karnataka, Kerala and Tamil Nadu, said one of those cited above. Since 800 MHz spectrum wasn't auctioned in these circles, its price is still to be determined.

Jio only had higher frequencies until the last auction in 2015, when it bought airwaves in 10 service areas in the 800 MHz band. The band, which has greater ranger and wall-penetration ability, may address the call drop or data loss problems that users typically face on higher bands.

Moreover, the device and electronic evolution in 4G technology has been much faster on the lower bands - 800 MHz and 1800 MHz --compared with 2300 MHz, which Jio had first acquired. Jio is expected to have sorted out any signal issues by the time of its official launch. RCom received the airwaves in 2002, but since they were allocated and not auctioned, the company cannot use them for anything other than CDMA.

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