BSNL’s spectrum return: Blessing in disguise for Reliance Jio

Reliance_JioBSNL and MTNL has surrendered BWA spectrum and they will get a refund of about Rs 11,258.48 crore but it appears to be a blessing in disguise for Reliance Jio.

Whether the BWA spectrum return by the PSUs willl help them financially or not is an event to see, but it will definitely going to help Reliance Jio. In the BWA auction, there were two pan India players-  PSUs combinedly (MTNL and BSNL) and Reliance Jio. Reliance Jio had 22 circles whereas BSNL had 20 circles and MTNL had 2 circles. BSNL has surrendered six circles- Gujarat, Maharashtra, Andhra Pradesh, Karnataka, Tamil Nadu and Kolkata. Out of the six circles, five are category A circles and one is metro circle. In the case of MTNL, both are metro circles of Delhi and Mumbai. With this surrender, Reliance Jio becomes the sole pan India operator and the industry feels that it has been done strategically to benefit Reliance Jio.

The returning of BWA spectrum in 8 circles (metro and Category A circles) will lead to further drop in revenues for BSNL and MTNL as Reliance Jio will now get a monopoly environment in BWA as no operators have a pan India spectrum except BSNL and MTNL. This gives Reliance Jio a major advantage as the policy makers by getting BWA spectrum from BSNL and MTNL in 8 circles is also giving Reliance Jio lot of leeway by eliminating their competitors in key circles even before they start their services.

Also, with this development, Reliance Jio’s business in these circles becomes less competitive.

According to industry estimates, these 8 circles will together contribute around 80 percent of broadband revenue for operators. In FY 2012-13, broadband contributed around Rs 4,229 crore revenue for both BSNL and MTNL and we will see lot of customers moving from PSUs to Reliance Jio whenever they start their services.

Private telcos killed BSNL and MTNL by getting their voice subscribers and now Reliance Jio will focus on churning broadband subscribers from MTNL and BSNL whenever they start their services.

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