Reliance Jio users, here’s ‘bad news’ for you

Reliance Jio users, here’s ‘bad news’ for youReliance Jio users, here’s ‘bad news’ for youKalyan Parbat Last week, the DoT refused to clear the RCom-Jio spectrum trading deal, saying it didn’t conform to government rules.ET BureauUpdated: Dec 24, 2018, 09:56AM IST

KOLKATA: Reliance Jio Infocomm subscribers could face disruptions in services in key markets such as Delhi, Maharashtra and West Bengal if the latest telecom entrant doesn’t manage to buy spectrum from Reliance Communications and the Anil Ambani-owned telco gets pushed into insolvency, sector experts and analysts said.

This, they said, is since the Mukesh Ambani-led telco is dependent on RCom to create contiguous spectrum blocks of five units in the premium 800 MHz band — the bare minimum spectrum requirement for 4G LTE services — in the key markets, which also include Andhra Pradesh, Karnataka, Tamil Nadu and Kerala. In each of these circles, Jio holds 3.8 units of 4G airwaves in the 800 MHz band, and is dependent on RCom’s spectrum in the same band for uninterrupted LTE coverage.

“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,” Rohan Dhamija, partner & head of India & Middle East at Analysys Mason, told ET.

The spectrum trading agreement was inked in late 2017, which if cleared, would have seen RCom sell 122.4 units of 4G airwaves to Jio, including the 800 MHz band LTE spectrum that it acquired from Sistema Shyam Teleservices, which has a longer-validity period. The airwaves sale pact is central to RCom’s plans to cut its mammoth Rs 46,000 crore debt, by some Rs 18,000 crore, which would help the Anil Ambani-owned telco stave off insolvency proceedings.

So, while the deal is critical for RCom, it’s also crucial to Jio, else the overall quality of its 4G LTE coverage could also suffer in other key markets like Mumbai, Gujarat, Madhya Pradesh, Himachal Pradesh, Bihar, Orissa, Assam and Northeast. This is since without access to RCom’s airwaves in these circles, Jio’s standalone holdings in this 4G band would be virtually half the combined holdings of the two companies.

“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,” said a senior industry executive, who did not wish to be named.

Under the circumstances, Jio would have no option but to continue its 21-circle spectrum sharing pact with RCom to ensure unhindered 4G LTE coverage. RCom and Jio have airwaves sharing pacts across 21 circles, barring Jammu & Kashmir.

That spectrum sharing arrangement could also face roadblocks, in the event the Anil Ambani-led telco gets mired in insolvency proceedings, experts noted. RCom is also sharing an additional 65-odd units of 800 Mhz LTE spectrum with Jio that it plans to sell to the 4G entrant for roughly Rs 3,700 crore and reduce its debt further.

“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,” said a senior industry executive who did not wish to be named.

In such a scenario, Jio wouldn’t be able to share RCom’s spectrum any more, including those in the 800 MHz band, he said. Experts also cited a government regulation that states that spectrum sharing can happen only between two licencees operating two independent networks in the same band. RCom has already shut its wireless services a year back.

Jio has its own back up 4G spectrum in the 1800 and 2300 MHz bands in all the markets where it is currently operating LTE services on the 800 MHz band via sharing with RCom. However, a senior industry executive said the quality of Jio’s 4G coverage would automatically decline if it were to migrate its network to the less efficient 1800 MHz band, which would also require a sizeable additional deployment of towers and drive up costs.

Also, such an airwaves migration exercise in the Jio network won’t be seamless, and is bound to cause service disruptions, as it would entail changes in network planning, he added. At press time, Reliance Jio and RCom did not reply to ET’s queries.

Last week, the Department of Telecommunications (DoT) refused to clear the RCom-Jio spectrum trading deal, saying it didn’t conform to government rules.

DoT’s refusal has dealt a body blow to RCom’s efforts to pay off creditors and avoid insolvency proceedings.