The broadband era has begun: Idea MD

Idea has got sufficient spectrum for GSM, broadband business: Himanshu Kapania

Rajesh Kurup
The Hindu Business Line
18 February 2014

Idea Cellular, India’s third largest mobile operator by users, has won the strong 900 MHz spectrum in the key Delhi metro and 4G spectrum across eight circles.

The Aditya Birla Group company has acquired a total of 65.2 MHz spectrum, a move that would help it expand 3G network in the country’s capital and make its eight circles 4G-ready. However, launching of 4G services would depend on the readiness of the market, said Idea Cellular Managing Director Himanshu Kapania.

The GSM operator will raise funds for the initial upfront payment through internal accruals and rebalancing of debt, he said, adding that these are investments for its future wireless broadband initiatives. Excerpts from an interview:

The telecom industry in general is of opinion that this time the bid prices were very high as against the previous auctions. Your comments?
First and foremost, we have to understand the difference of this auction from the earlier two auctions that were held in November 2012 and March 2013.

The industry has very wrongly called this a 2G auction, while this time the spectrum auction was to provide telecom companies, such as ours, spectrum to maintain or sustain the current levels of growth.

The spectrum can be used for multiple businesses such as offering GSM services. Idea Cellular has got sufficient spectrum across the country for GSM business, but the same spectrum can also be used for wireless broadband business. That’s why we say this is not a 2G auction.

Idea, through this auction, is making investments for our future wireless broadband initiatives.

So, the spectrum auction is a success?
Yes, the auction is primarily a success as most operators that did not have wireless spectrum have won the spectrum and can now offer broadband services. This is the start of the broadband era.

With this bid, is Idea Cellular gearing up to launch 4G services? What would be your plans for 3G?
With Idea Cellular winning 900 MHz in Delhi, we would now be able to launch 3G services in Delhi.

This would help us increase our 3G footprint to 12 circles from the earlier 11, and this would cover nearly 79 per cent our gross revenues (Idea standalone gross revenues was at Rs.25,558 crore in calendar 2013).

In eight of our circles, covering 64 per cent of revenues, Idea now has the ability to launch 4G services.

When our competitors are launching 4G services, it’s only imperative we also launch the services.

Now, we would be 4G ready. We will launch the services when the eco-system is ready.

Now the industry thinks that high spectrum prices would result in an increase in telecom tariffs? Will it?
I think that’s the natural expectation. Yes, tariffs will strengthen, so will the minutes of voice usage, while we also expect an increase in value-added services usage. With companies now investing in spectrum to further build capacities, the focus of telecom companies would be on the average revenue per user (a key financial metric).

Your comments on consolidation in the sector as some companies have not won spectrum and mobile number portability helping companies such as Idea win subscribers?
With the number of operators falling, it only strengthens the premise that consolidation is on its way. I believe from the present six key operators, it would further boil down to four.

How are you planning to fund this auction?
Of the total Rs.10,400 crore (accepted bid), we need to make an upfront payment of Rs.3,100 crore. As of third-quarter end, we have about Rs.2,500 crore cash in balance sheet. We will raise the remaining Rs.600 crore from internal accruals and rebalancing of debt. Then there is a two-year moratorium period, after which we have to pay the remaining Rs.7,300 crore in 10 equal instalments.