Why Airtel-RJio deal augurs well for the telecom sector

The spectrum trading deal announced by Airtel and Reliance Jio is an indication that the telecom sector is set for stable growth based on mature decision-making. Over the past two decades, the telecom sector has been embroiled in messy litigations due to the stakeholders’ short-term thinking.

Since 2001, the industry has been divided into two camps - one camp led by Sunil Mittal-backed Airtel and the other led by Mukesh Ambani’s Reliance Industries. The two sides have been at each other throats on several issues, starting with the policy of allowing CDMA technology through Wireless-in-Local-Loop services to the dispute over Interconnection Usage Charges.

Therefore the latest spectrum trading comes as a breath of fresh air as the top two operators are now thinking of collaborating. The deal is a win-win for both Airtel and RJio.

For Reliance Jio, the deal allows them to access a new spectrum in three circles- Andhra Pradesh, Delhi, Mumbai. In Andhra Pradesh and Delhi, the trading deal with Airtel will enable RJio to take its holding in 800 Mhz to 10 Mhz each. This is significant because data services need at least 10 Mhz spectrum in a frequency band, and RJio was short of this benchmark in both these circles. In Mumbai, RJio will enhance its holding in the 800 Mhz band from 12.5 Mhz to 15 Mhz, thus giving them more bandwidth in a city like Mumbai, where data consumption is very high. This is in line with RJio’s strategy of accumulating more spectrum in the 800 Mhz band. Earlier, it had acquired spectrum in the same band from Anil Ambani’s Reliance Communications. RJio also bought more than 800 Mhz spectrum in the recently concluded spectrum auction. In this context, the deal with Airtel is an indication that RJio will base its sub 1GHz strategy on the 800 Mhz band. Sub 1Ghz spectrum is crucial for telecom because it is considered ideal for 4G and 5G services given its better propagation characteristics.

For Airtel, 800 Mhz has never been key. It has focussed on the 900 Mhz band. The deal with RJio allows Airtel to get rid of the “useless” spectrum in the 800 Mhz. An operator needs at least 5 Mhz spectrum in a frequency band to offer even basic voice services. Airtel owned residual spectrum in the 800 Mhz band in these three circles, which was lying idle.

But more than the specifics of the deal, the fact that two rival players have decided to what’s right for each other augurs well for a sector that numerous litigations have bruised in the past.