Videocon surges 9% after 4G spectrum sale to Idea Cellular

Idea, a unit of the Aditya Birla conglomerate and almost afifth-owned by Malaysia's Axiata, plans to use theacquired spectrum for launching 4G broadband services in Gujaratand Uttar Pradesh (west), the company said in a statement.

"The effective date of spectrum trading will not be earlier than 45 days from the date of joint intimation, as defined in the guidelines", said Idea Cellular in a statement.

"With this spectrum buying and selling association, Idea's 4G (LTE) spectrum footprint will increase to 12 service areas overlaying over seventy five% of Idea's present income and over seventy two% of present one hundred seventy million high quality subscribers", the assertion stated. This agreement for the company's two Leadership telecom circles is for a quantum of 2x5 MHz contiguous blocks of 1800 MHz in each service areas, with right to use spectrum until December, 2032.

Idea Cellular on Tuesday agreed to acquire spectrum from Videocon for 33.1 billion rupees (€469.5 million), a deal that will put India's recently-enacted spectrum trading rules to the test.

The deal also includes Idea taking over Videocon's outstanding "deferred payment liability" owed to the telecoms department after its acquisition of spectrum in Gujarat and Uttar Pradesh in the November 2012 Access Spectrum auction. After this transaction is completed, the company expects to launch 4G services in 12 circles.

"We intend to use this spectrum for the launch of 4G services in these areas next year".

The company will launch its 4G (LTE) services in 750 towns across existing ten 4G circles by first half of calendar year 2016 and after completion of this transaction, plans to introduce 4G services in 2016 for Gujarat and Uttar Pradesh (West) telecom service areas, according to a statement from the company. "It is not entirely clear why such a premium - perhaps it is due to spectrum contiguity", Sachin Gupta and Pankaj Suri, research analysts at Nomura said in a note to clients.

Videocon Telecom was awarded the Unified License for 6 circles namely UP-East, UP-West, Bihar, Gujarat, Madhya Pradesh & Chhattisgarh and Haryana, which is valid for a period of 20 years.

Arvind Bali, Director and CEO, Videocon Telecom said the company has exercised the first Spectrum trading option for our UPW and Gujarat cirles post announcement of Spectrum trading policy.

As per data from Telecom Regulatory Authority of India (Trai), Gujarat had total VLR (visitor location register) subscribers of around 55 million in September, while UP (West) had about 48 million VLR subscribers, across all telecom operators. Citigroup said the high price was a reflection of the importance of contiguous spectrum which was critical for 4G.

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