Full text of Mukesh Ambani's speech at Reliance AGM
Full text of Mukesh Ambani's speech at Reliance AGM [Photo: Anil Ambani (R), chairman of the Reliance Anil Dhirubhai Ambani Group, talks to his brother Mukesh Ambani, chairman of Reliance Industries Limited, during the launch of "Digital India Week" in New Delhi, India, July 1, 2015.]Reuters

Mukesh Ambani's Reliance Jio may help Anil Ambani-led Reliance Communications (RCom) in paying up a liberalisation fee of Rs 5,384 crore for sharing its 800 MHz spectrum in 16 circles. The spectrum liberalisation fee is collected from telecom operators for all the circles where airwaves were not auctioned.

The department of telecommunications (DoT) had, on 22 December, also asked RCom to pay a one-time spectrum usage charge of Rs 1,596 crore within a month, sources told Business Standard.

"The company will submit a bank guarantee equal to the one-time spectrum usage charge of Rs 1,596 crore as the matter is sub judice," the sources said.

RCom, India's fourth largest telecom operator by subscribers, plans to partner with Reliance Jio to offer 4G services. In September last year, RCom chairman Anil Ambani had said the company would enter into a "strategic partnership" with Reliance Jio for 4G spectrum sharing-cum-trading.

RJio possesses 2,300 MHz in all circles, 1,800 MHz in 18 circles and 850 MHz in 10 circles. But, 800 MHz band provides good connectivity indoors and offers seamless voice services through Voice over LTE (VoLTE). The benefits of having 800 MHz spectrum has made the deal "critical" to roll out 4G services. The tie-up will enable RJio to provide 4G services over the 800 MHz band across 10 circles.

On the other hand, the partnership will also be beneficial to RCom, as it can use Jio's 4G network in the 10 circles without incurring any "incremental capex cost".

By the end of September, RCom had a huge debt load of Rs 39,800 crore, which it plans to reduce to Rs 20,000 crore by selling its tower business Reliance Infratel.

Meanwhile, the merger of RCom and Sistema Shyam Teleservices (SSTL), which provides telecom services through MTS brand, will enable the former to gain access to liberalised 800 MHz spectrum in eight circles. MTS has a strong presence in non-voice segment and derives nearly half of its total revenues from the segment.

Analysts said that increased competition in the data services will likely lead to further increase in capital expenditure by the operators to keep growth intact. Telecom companies are also expected to purchase spectrum from others at a higher price, resulting in increased debt levels.

In November last year, Idea Cellular had agreed to buy spectrum for two circles -- Gujarat and Uttar Pradesh (West) -- from Videocon for Rs 3,310 crore, which is double the amount paid to acquire spectrum for those circles in the March 2015 auction.

Also read