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Airtel fully acquires Qualcomm's 4G unit, seen set on warpath with Reliance Jio

Sunny Sen     October 18, 2013
Sunny Sen
An acquisition of a minority stake by Bharti Airtel, India's largest phone services firm, in a broadband wireless firm sets itself squarely against an ambitious high-speed data services venture that Mukesh Ambani, the richest Indian, is priming for launch next year.

Airtel announced on Friday that it has acquired 6.55 per cent of Wireless Business Services, a subsidiary of US chipmaker Qualcomm, that won broadband wireless access (BWA) licences in 2010. The Sunil Mittal-controlled Airtel has owned 49 per cent of Wireless Business Services since May 2012, and increased share to 93.45 per cent in July this year.

Airtel, which has already launched 4G services in Kolkata and Bangalore, has spent a total of about $336 million buying up all of Wireless Business Services.

BWA spectrum is the fastest way to provide Internet, up to ten times faster than speeds offered by third generation, or 3G, networks.

Airtel is betting heavily on data revenue. It has already got some initial success by way of 3G and 2G subscriber growth. Its data consumption per customer has gone up by 81 per cent in the last one year. Its 3G subscriber base has doubled to seven million subscribers in the same period. But its 4G numbers have stayed flat or fallen, which analysts attribute to high tariffs.

However, the company expects that in the coming years, as it rolls out services in all the eight circles it has BWA spectrum for and with the availability of more LTE (the technology Airtel is using to deliver 4G) devices, there will be more takers. "When three things - content, devices and customers - all these come together there will be an explosion," N. Rajaram, Chief Marketing Officer of Bharti Airtel had told Business Today in an interview sometime back.

Friday's deal sets up a face-off for Airtel with Reliance Jio, the Ambani company preparing for a big splash in data services.

The company has been planning networks and testing services since it bought BWA licences immediately after HFCL Infotel, a company controlled by Delhi businessman Mahendra Nahata, won spectrum rights in India's 22 so-called telecom circles or licensed areas.

Reliance Jio, which counts former Maxis CEO Sandip Das and Arvind Rao, who formerly led value added services provider OnMobile, among its top executives, is reported to be negotiating hard with Huawei and Samsung on device prices. The company aims to launch data services at tariffs that are very low.

This is the second time that Mittal and Ambani are in face-off in telecom.

In the early-2000s, Reliance Infocomm entered mobile telephony, squaring off with Airtel in a market that was a fraction of what it is today. Over the last dozen years or so, Airtel emerged on top of what is the world's second-largest market for telecom services. Reliance Communications, as Reliance Infocomm is called today, is not ranked among the top three in the industry.

Airtel has a first mover advantage and an opportunity to capitalise in the eight prosperous and urban circles - Maharashtra, Punjab, Karnataka, Kolkata from its own bids in 2010 and Delhi, Mumbai, Kerala and Haryana after the full acquisition of the Qualcomm unit - it is present in. "Reliance is a formidable deep pocketed player, but in no way is a current dominant player in telecom. In fact, Airtel is in that position," Mahesh Uppal, an independent telecom analyst, said.

The next war in telecom may be just starting.

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