Here’s the fine print of the deal and how it will boost business for Jio and Airtel.
The deal specifics
The deal will enable Mukesh Ambani-led Jio to put to use 800 MHz of Sunil Mittal-led Airtel’s unused airwaves. Airtel got this 800 MHz in Andhra Pradesh, Delhi and Mumbai as part of acquisition of Tata Teleservices’ consumer wireless business in 2019.
Under the deal with Jio, Airtel will sell 3.75 MHz of bandwidth in Andhra Pradesh, 1.25 MHz in Delhi and 2.50 MHz in Mumbai. These three account for 17% of Jio’s gross revenues.
The money involved
Jio acquired the right for this for around Rs 1,500 crore. That includes Rs 459 crore in future spectrum-related liabilities.
Airtel will get Rs 1,040 crore in cash. Besides, its spectrum liability will go down by Rs 459 crore as Jio assumes future liabilities, as stated above.
Why it had remained unused
These airwaves, which have a 14-year validity, were below the requisite block of 5 MHz needed for 4G use. That is the reason they remained unutilised.
The newly acquired airwaves will now help Jio strengthen its holdings in three circles.
Why it is good for Jio
Jio got the airwaves from Airtel at about half the standard spectrum auction price. That will help Ambani save around $400 million, not a small sum by any standards.
The deal will bolster Jio, the only user of 800 MHz spectrum in all 22 circles, even further.
Why it is good for Airtel
Till the sale, Airtel was unable to unlock any value from the unutilised spectrum. This pricey spectrum was of no use to it. The 800 MHz in question was not suitable to Airtel’s spectrum plans, the company said in a statement following the deal.
Jio’s acquisition of the airwaves brings down Airtel’s spectrum liability by Rs 459 crore as any future payment will be Jio’s liability.
A message to Indian telecom
The deal shows that after years of intense, bitter rivalry, the top two telcos can still put their differences aside for a common purpose. The pacts highlights that Jio and Airtel can work together for a mutually beneficial cause, Credit Suisse said.