Rs.3,310 crore Videocon - Idea spectrum deal off
Idea Cellular Ltd and Videocon Telecommunications Ltd (VTL) have jointly agreed to cancel their Rs.3,310 crore spectrum deal for Gujarat and Uttar Pradesh telecom circles. Both the firms did not give any reason for the termination of the agreement which comes into effect immediately. Meanwhile, Idea moved forward with the launch of its high-speed mobile broadband 4G LTE services in its 10th circle.
What is spectrum trading?
Spectrum trading enables telecom corporations to sell/transfer their spectrum licenses to another company. Spectrum trading in the telecom division has been on the rise after the government authorized spectrum trading and sharing in 2015.
Videocon wins spectrum in 6 circles
In 2012, Videocon won spectrum in 6 circles- UP(East), UP(West), Bihar, Gujarat, MP and Haryana for Rs.2,221.44 crore in the auctions. 1800MHz band spectrum in UP (West) and Gujarat alone was acquired for Rs.1,329 crore. Videocon had made an upfront payment of Rs.438.57 crore to the government. Videocon planned to sell the spectrum in UP East and Bihar at a value of Rs.3,500 crore.
Idea to buy Videocon spectrum in Gujarat, UP
Idea Cellular signed a deal with Videocon Telecommunications to purchase its airwaves in Gujarat and Uttar Pradesh (West) for Rs.3,310 crore. This spectrum was to be used by Idea for the launch of its 4G services in these areas. Along with the license to use spectrum, Idea would also take on Videocon's outstanding liabilities which entails paying the government for these airwaves.
Tax issues may lead to restructuring Videocon-Idea spectrum deal
The government, in its budget, recommended exacting a service tax on spectrum trading deals beginning June. This announcement may lead to the 'restructuring' in Idea Cellular's deal with Videocon to buy 4G spectrum. If the deal is not completed before June 1 this year, Idea will be liable to pay Rs.496 crore in taxes to the government.
Idea's loss becomes Airtel's gain
Bharti Airtel has decided to buy Videocon Telecommunications' spectrum in six circles, in a Rs.4,428 crore deal. The shares of both companies rose after the announcement. The announcement came shortly after Idea Cellular cancelled its Rs.3,310 crore spectrum agreement with Videocon. Bharti Airtel said that it would procure Videocon's spectrum in Bihar, Madhya Pradesh, Haryana, Uttar Pradesh (East), UP (West) and Gujarat.
