RCom may get around Rs 4,500 crore by trading its radiowaves to Reliance Jio.
Ahead of the commercial launch of the nation's biggest 4G broadband network, the Ambani brothers signed telecom spectrum trading and sharing agreements to bolster Reliance Jio's indoor coverage and seamless voice services.
Anil Ambani's Reliance Communication will trade CDMA grade spectrum in 800 MHz band in 9 service areas where Jio doesn't have the radiowaves. In 17 circles, the two companies will share spectrum, both the firms said in press statements.
As part of the strategic agreement, they also intend to enter into reciprocal intra-circle roaming (ICR) arrangements.
RCom may get around Rs 4,500 crore (Rs 45 billion) by trading its radiowaves to Reliance Jio.
These will used to pay most of the Rs 5,384 crore (Rs 53.84 billion) spectrum liberalisation fee to the Department of Telecom for 16 circles by January 22. The balance will come from the proceeds of the real estate asset sale deals.
RJio holds 2300 Mhz spectrum in all 22 circles which it acquired in 2010. It added 1800 Mhz in 18 circles and 800 Mhz in 10 circles.
The 800 Mhz band will allow it to a rollout of 4G-LTE services which offers good coverage indoors and provides seamless voice services through VoLTE.
The deal between RCom and RJio is the second spectrum trading agreement after Idea Cellular's pact to buy spectrum from Videocon in two circles for Rs 3,310 crore (Rs 33.10 billion).
"The spectrum arrangements between Jio and RCom will result in network synergies, enhanced network capacity and will optimise spectrum utilisation and capex efficiencies.
Both operators anticipate considerable savings in operating costs and future investment in networks," RCom said.
RJio needed spectrum in 800 and 1800 MHz band due to signal attenuation inherent in the 2300 MHz frequency range; 800 MHz band allows easy propagation through multiple wall structures compared to signal penetration of less than a kilometer through the 2300 MHz band.
The subscribers of RCom will be able to access RJio's LTE network under the reciprocal sharing and ICR agreements. However, the arrangements are subject to liberalisation of RCom spectrum in the 800 MHz band and obtaining requisite approvals.
Post agreement with RCom, RJio now has 1800 MHz band spectrum in 18 telecom circles, 800 MHz band in 17 circles, and 2300 MHz band in all 22 telecom circles.
The two firms said spectrum trading will happen in 9 circles and subsequently Reliance Jio and RCom will share spectrum in 17 circles.
However, sources said that eventually spectrum sharing will be done in all 22 circles.
The source said that in phase 1, spectrum in 17 circles will be shared as RCom is awaiting 800 MHz spectrum liberalisation demand letter from DoT in 4 circles where there is no market price benchmark (Rajasthan, Kerala, Karnataka and Tamil Nadu) and in J&K, there are some technical issues that are being sorted out.
"Reliance Jio Infocomm Ltd and Reliance Communications on Monday announced the signing of agreements for change in spectrum allotment in 800 MHz band across 9 Circles from RCom to RJIL, and for sharing of spectrum in 800 MHz band across 17 circles," the two firms said.
The spectrum arrangements between Reliance Jio and RCom will result in network synergies, enhanced network capacity and will optimise spectrum utilisation and capex efficiencies, they added.
Both operators anticipate considerable savings in operating costs and future investment in RCom's customers will benefit from access to Reliance Jio's nationwide 4G LTE network under the reciprocal sharing and ICR agreements.
The arrangements are subject to liberalisation of RCom spectrum in the 800 MHz band and obtaining requisite approvals.
These agreements further strengthen the comprehensive framework of business co-operation between Reliance Jio and RCom, following the nationwide long term agreements for inter and intra city optical fibre networks, and for sharing of telecom tower infrastructure, the companies said.