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Airtel acquires Aircel's 4G spectrum for Rs.3500 crore. Picture [Representational Image]Reuters

India's Bharati Airtel will spend Rs.3500 crore to acquire the fourth-generation (4G) spectrum from Aircel, the company said in a filing to stock exchange. The acquisition of 20 megahertz (MHz) 2300 frequency in eight telecom circles in the country will make Airtel a pan-India 4G service provider.

The Sunil Mittal-owned telecom carrier, with this latest acquisition, will be locking horns with the only other pan-India 4G licence holder, Reliance Jio Infocomm. A unit of the Mukesh Ambani-owned Reliance Industries Ltd, Reliance Jio, is preparing to launch its 4G services in the second half of 2016.

Aircel's spectrum, valid up to 2030, will cover circles of Tamil Nadu, Bihar, Jammu and Kashmir, West Bengal, Assam, the Northeast, Andhra Pradesh, and Odisha.

Citing sources the Economic Times reported that the deal will also help Aircel to reduce debt and perhaps fulfill a merger-condition with Reliance Communication (RCom), a unit owned by the other Ambani brother, Anil.

The Airtel-Aircel deal comes a fortnight after Airtel's 4G spectrum acquisition of 1800 MHz band in six circles for Rs. 4,428 crore from Videocon. According to the report, this was a second such acquisition, following RCom's acquisition of Sistema Shyam TeleServices (MTS), since the government allowed trading of airwaves in October 2015.

The liberalisation of rules for spectrum trading in India is seeing a consolidation in the telecom sector. The competition in a space crowded with 11 operators has kept the cost of spectrum high while tariff-wars offered low prices, in turn driving down the profits. The unhealthy trend is adding pressure on the already stressed balance sheet of telcos, said Mint.

The daily quoted Alok Shinde of Ascentius Consulting as saying, "technological change had accompanied the evolution of the telecom market". He said the auction of 4G in the 2300MHz band happened in a context of pre-inception business model around TD-LTE (time-division long-term evolution) technology in 2010. It was a standard with little validation anywhere in the world then, but today there is greater credence both among the technology and the business model, he added.

ET reported that most telcos which acquired 4G airwaves in 2010 have even failed to meet the roll-out obligations, therefore facilitating a consolidation exercise.

India's top three telcos, Airtel, Vodafone and Idea cellular, have so far successfully rolled out 4G service in 15, five and 10 circles, respectively.