Bharti Ends Jio’s Ad­van­tage with Spec­trum Deals

Af­ter deals with Air­cel and Video­con, Bharti be­comes a pan-In­dia 4G player be­fore Jio’s com­mer­cial launch

The Economic Times - - Special Feature - Kalyan.Par­bat@ times­

Kolkata: Bharti Air­tel’s ac­qui­si­tion of Air­cel’s 4G air­waves has taken out Re­liance Jio In­fo­comm’s first-mover ad­van­tage in the fast mo­bile broad­band turf, with In­dia’s No. 1 telco be­com­ing a pan-In­dia 4G player even be­fore the Mukesh Am­bani-owned firm launches com­mer­cially. The buy will also re­duce Air­tel’s un­cer­tainty and need to bid ag­gres­sively in the air­wave auc­tions slated for July, an­a­lysts said.

Since “Bharti now has the abil­ity to of­fer LTE in all 22 cir­cles, Re­liance Jio has no first-mover ad­van­tage any­where, any­more,” bro­ker­age Ko­tak In­sti­tu­tional Eq­ui­ties said in a note. The Mukesh Am­bani telco has kept a tight lid on the tim­ing of its com­mer­cial launch, but bro­ker­ages ex­pect a soft launch in April it­self and a wider com­mer­cial launch by De­cem­ber. Jio had rolled out ser­vices for its 1.2 lakh em­ploy­ees and part­ners last De­cem­ber.

Ac­qui­si­tion of Air­cel’s 4G air­waves in eight cir­cles on the heels of Video­con’s, an­a­lysts said, would also pro­pel Bharti Air­tel’s over­all spec­trum mar­ket share to 21%, rac­ing past Bharat San­char Nigam’s 18% and Re­liance Jio In­fo­comm’s 13%.

Last week, the Su­nil Mit­tal-founded com­pany an­nounced plans to buy Maxis-owned Air­cel’s 4G spec­trum in the 2300 MHz band in eight mar­kets for .₹ 3,500 crore. The eight mar­kets are Tamil Nadu (in­clud­ing Chen­nai), Bi­har, Jammu & Kash­mir, West Ben­gal, As­sam, North East, Andhra Pradesh and Orissa. Air­cel’s 4G air­waves in the 2300 MHz band — used for 4G — are valid till Septem­ber 20, 2030.

Cit­i­group added that the Air­tel’s spec­trum buys from Air­cel and Video­con will in­crease es­ti­mated net debt in this fis­cal year by only 8%. Ad­justed net debt/EBITDA will be 2.7x (2.4x on cur­rent es­ti­mates). Apart from pan-In­dia LTE cov­er­age, Bharti will have an LTE pres­ence in both TD (on 2300 MHz)/FD (1800 MHz) vari­ants in 13 cir­cles, in­clud­ing each of its lead­er­ship cir­cles among the met­ros and Cat­e­gory A ser­vice ar­eas, where ca­pac­ity and cov­er­age are key,” said Gold­man Sachs in a note to clients.

Ac­qui­si­tion of Air­cel’s 4G air­waves, the US bro­ker­age said, would also leave In­dia’s big­gest telecom com­pany “well placed to gain mar­ket share from (ri­val in­cum­bents) Voda­fone In­dia and Idea Cel­lu­lar, and also de­fend its mar­ket po­si­tion once Jio launches”.

An­a­lysts at Gold­man Sachs, in fact, be­lieve “Jio would not have any ca­pac­ity ad­van­tage ver­sus Bharti in most cir­cles” adding that “it is un­likely that Jio will be able to take mar­ket share from Bharti by com­pet­ing on price”, a view sec­onded by Deutsche Bank.

“We be­lieve Bharti has the cost-po­si­tion, scale and cash­flows to de­fend its rev­enue share and mar­gins against the im­pact of Jio’s launch,” said Deutsche Bank in a note seen by ET.

Mor­gan Stan­ley also be­lieves Bharti’s coun­try­wide 2300 MHz air­wave holdings will stand it in good stead. “4G spec­trum in the 2300 MHz band is prov­ing to be valu­able with its lower spec­trum us­age charges (SUC), de­vel­op­ing equip­ment and hand­set ecosys­tems, as most of the in­cre­men­tal smart­phones shipped are multi-mode/ multi-band, and thus 2300 MHz com­pat­i­ble,” said the US bro­ker­age. Bro­ker­age BNP Paribas feels Bharti has enough spec­trum for cov­er­age and ca­pac­ity, and does not need to spend much in the next auction, once it con­cludes re­cent 4G spec­trum ac­qui­si­tions from Air­cel and Video­con.

An­a­lysts at IDFC said the deal would help In­dia’s No 1 mo­bile op­er­a­tor set aside the un­cer­tainty of bid­ding in the next auction.

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