Reliance Industries' chairman Mukesh Ambani in a file photo. Photo: Agencies

Reliance Jio Infocomm, India’s largest telecom service provider, is on a drive to increase its network capacity and strengthen its spectrum footprint across the country.

In the latest development, the Mukesh Ambani-owned company has signed an agreement with rival Bharti Airtel for the trading of right to use the latter’s spectrum in the 800 MHz band in Andhra Pradesh, Delhi and Mumbai circles.

The aggregate value for this deal is 14.97 billion rupees (US$203 million) and the transaction is subject to the requisite regulatory and statutory approvals.

This agreement will enhance Reliance Jio’s spectrum footprint in the three circles. In a regulatory filing, the company said: “The trading agreement is in accordance with the Spectrum Trading Guidelines issued by the Department of Telecommunications.”

Bharti Airtel MD and CEO Gopal Vittal said the sale of the 800 MHz blocks has enabled the company to unlock value from spectrum that was not utilized. In a regulatory filing the company said: “Through this agreement, we will receive a consideration of 10.37 billion rupees ($141 million) from Reliance Jio for the proposed transfer. In addition, Reliance Jio will assume future liabilities of 4.59 billion rupees ($62.45 million) relating to the spectrum.”

Spectrum auction

After cornering the top position in terms of subscribers, barely five years after its launch, Reliance Jio has been eager to increase its spectrum footprint. In the latest round of spectrum auctions by the Indian government in March, Reliance Jio bought more than half the telecom spectrum auctioned.

While telecom companies collectively spent 778.14 billion rupees ($10.58 billion) to buy additional spectrum, Reliance Jio shelled out 571.22 billion rupees ($7.77 billion) to buy 489 megahertz across three bands. The Indian government had sold 855.6 megahertz of the total 2,308.8 units of spectrum up for sale.

Bharti Airtel bid 187 billion rupees to pick up 355.45 megahertz out of the 855.60 megahertz of radiofrequency, making it the “most formidable” spectrum holding across the country. Vodafone Idea spent 19.93 billion rupees to buy 11.9 megahertz spectrum in five circles.

Market analysts feel these investments will help telecom companies build network capacity for the deployment of 5G services. However, on the flip side, they expect telecom tariffs to rise as the companies are expected to pass on their costs to the customers.

In addition, both Vodafone Idea and Bharti Airtel have to pay huge sums as adjusted gross revenue dues to the telecom department as mandated by the Supreme Court.