New Reliance Jio 4G LTE Network Might Suffer After RCom Spectrum Trading Deal Fallout: Experts

With the Department of Telecommunications not approving the Reliance Communications and Reliance Jio deal, the spectrum trading contract fell through. After this affair, it seems that RCom is not the only telecom operator to suffer the blow of this setback. As per an ET Telecom report, analysts and experts have said that Reliance Jio’s services will experience disruption if the Mukesh Ambani-led telco does not acquire the spectrum from Reliance Communications. The experts noted that Reliance Jio’s services in the Delhi, Maharashtra and West Bengal region would suffer after the fallout of the deal.

Reliance Jio to Miss Out on Crucial 800MHz Spectrum

Going by the words of the experts, Reliance Jio will need to setup contiguous five blocks of the premium 800MHz spectrum in the key markets of Andhra Pradesh, Karnataka, Tamil Nadu and Kerala. It was also noted that the 800MHz is the bare minimum requirement for 4G LTE services and currently Jio holds 3.8 units of 4G airwaves in the 800MHz spectrum, and it will need Reliance Communications’ spectrum in the same band to ensure uninterrupted coverage for its 4G LTE services.

Rohan Dhamija, partner & head of India & Middle East at Analysys Mason said, “It’s critical that the spectrum trading deal gets cleared soon as it will give Jio exclusive access to RCom’s 4G spectrum that will help it create contiguous blocks in the 800 MHz band, which is absolutely essential for LTE coverage to avoid service disruptions in key markets.”

To recall, the spectrum trading deal between the two telecom operators was agreed upon back in 2017. If approved, this deal would then transfer Reliance Communications’ 122.4 units of 4G airwaves to Reliance Jio, including airwaves in the 800MHz band as well, which RCom had acquired from Sistema Shyam Teleservices with a more extended validity period. It shouldn’t also be forgotten that if the deal goes through, then it will help Reliance Communications in paying off its massive debt of Rs 46,000 crore by some Rs 18,000 crore. This would also help RCom avoid insolvency proceedings.

Spectrum Trading Deal Equally Important for Reliance Jio

With this new revelation by the experts, it is pretty much clear that the spectrum trading deal is very crucial for both the parties. Since without RCom’s spectrum, Reliance Jio’s total spectrum holding will only be half of the combined holding of both the companies. Thus if the deal does not go through, then the Reliance Jio 4G LTE network in circles including Mumbai, Gujarat, Madhya Pradesh, Himachal Pradesh, Bihar, Orissa, Assam and Northeast might suffer.

Also, a senior industry executive said under anonymity, “The overall quality of Jio’s LTE coverage is bound to decline in markets like Mumbai, Gujarat, MP and the eastern circles since halving of available 800 MHz spectrum will automatically reduce the network capacity.”

Spectrum Sharing Setup Between RCom and Jio Also in Jeopardy

If the present situations prevail, then Reliance Jio might have to continue with the Reliance Communication’s spectrum sharing arrangement which Jio is using in 21 states except in Jammu and Kashmir. The experts have also noted that even this arrangement between the telcos might be prone to disturbance if Reliance Communications is dragged into insolvency court. Under the sharing agreement, RCom plans to sell 65-odd units of 800 Mhz LTE spectrum for roughly Rs 3,700 crore additionally, which it is sharing right now.

Another senior industry executive remarked about this development, “If RCom gets dragged into insolvency proceedings, and even worse, goes into liquidation, all its spectrum assets would get taken over under the Insolvency Bankruptcy Code (IBC), 2016, to be auctioned to pay off creditors, which is a complicated and long-drawn process.”

The experts added that in case this happens, then Reliance Jio will no longer be able to share RCom’s spectrum since the regulations dictate that two operators operating independent networks on the same band can only share the spectrum. However, RCom has already shut its services a year back. Although Reliance Jio has its 4G LTE backup spectrum in the 1800MHz and 2300MHz band, the transition to this band from the 800MHz band would mean a decline in Reliance Jio’s 4G connectivity. Further, the telco will also need to deploy additional towers thus resulting in driving up of costs.

Last week, the Department of Telecommunications (DoT) had refused to grant clearance to the spectrum trading deal between Reliance Communications and Reliance Jio, thus increasing the hurdles for RCom in its efforts to pay back its lenders for steering clear of insolvency proceedings.