Why Is Reliance Jio Purchasing Spectrum From Airtel?

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The spectrum trading deal between Reliance Jio and Airtel is likely to help Jio save $400 million. This deal will allow Airtel to use its unutilized spectrum, which means the deal is good for both telcos, as Jio will expand its coverage and Airtel will make profit from its unused spectrum.

Why Is Reliance Jio Purchasing Spectrum From Airtel?

 

Notably, Reliance Jio wants to buy 6.25MHz, 8.75MHz, and 7.5MHz spectrum in Andhra Pradesh, Delhi, and Mumbai in the 800 MHz band. This deal is expected to help Reliance Jio to solve all network issues and expand its coverage in these circles.

"Reliance Jio now topped up its holding in these circles to 10MHz, 10MHz, and 15MHz respectively, for a total consideration of Rs. 14.97 billion. With the remaining validity of 14 years, the implied cost/MHz/annum comes to Rs. 140 million. Jio has therefore not only built up 10-15MHz blocks in these key circles but has potentially saved $400 million," financial firm UBS said.

The firm said Airtel is already using 900 MHz band in the Andhra Pradesh, Delhi, and Mumbai circles, which is why it seems a good deal for the operator. The firm pointed out that Airtel received more spectrum from Tata Teleservices in 2019, which is unused. The financial firm added that the 800 MHz band was available in the auction and Reliance Jio had the option to purchase it at that time, but still, this deal seems no loss for Airtel.

Reliance Jio Will Get Discount On Spectrum

Meanwhile, another financial firm added that Reliance Jio will get a 47 percent discount on 800 MHz if they buy from Airtel. "Further, Jio now has a contiguous block of 2x10MHz of 800MHz spectrum each in AP and Delhi service areas and 2x15MHz in Mumbai service area," it added.

More Spectrum Might Help Reliance Jio To Increase Revenues

 

Furthermore, it is expected that this additional spectrum will help Reliance Jio to get more revenues from these circles as they are contributing only 17 percent to the overall revenues. On the market share front, Reliance Jio has 32 percent, 40 percent, and 31 percent share in Delhi, Andhra Pradesh, and Mumbai respectively.

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