Another way of improving the channel capacity of a cellular system is to decrease the D/R ratio while keeping the same cell radius. Improvement in the capacity can be accomplished by reducing the number of cells in a cluster, hence increasing the frequency reuse. To achieve this, the relative interference must be minimized without decreasing the transmit power.

For minimizing co-channel interference in a cellular network, a single omni-directional antenna is replaced with multiple directional antennas, with each transmitting within a smaller region. These smaller regions are called sectors and minimizing co-channel interference while improving the capacity of a system by using multiple directional antennas is called sectoring. The amount up to which co-channel interference is minimized depends on the amount of sectoring used. A cell is generally divided either into three 120 degree or six 60 degree sectors. In the three-sector arrangement, three antennas are generally located in each sector with one transmit and two receive antennas.

The placement of two receive antennas provide antenna diversity, which is also known as space diversity. Space diversity greatly improves the reception of a signal by efficiently providing a big target for signals transmitted from mobile units. The division between the two receive antenna depends on the height of the antennas above ground.

When sectoring technique is used in cellular systems, the channels used in a particular sector are actually broken down into sectored groups, which are only used inside a particular sector. With 7-cell reuse pattern and 120 degree sectors, the number of interfering cells in the neighboring tier is brought down from six to two. Cell sectoring also improves the signal-to-interference ratio, thereby increasing the capacity of a cellular system. This method of cell sectoring is very efficient, because it utilized the existing system structures. Cell sectoring also minimized the co-channel interference, with the use of directional antennas, a particular cell will get interference and transmit only a fraction of the available co-channel cells.

It is seen that the reuse ratio q = (NI × S/I)1/n, where NI depends on the type of antenna used. For an omni-directional antenna with only first-tier of co-channel interferer, the number of co-channel interfering cells NI = 6, but for a 120 degree directional antenna, it is 2

So, the increase in S/I ratio is

$\dfrac{{(N_I\times{}S/I)}_{120^\circ{}}}{{(N_I\times{}S/I)}_{omni}}\ =\ \dfrac{q_{120^\circ{}}^n}{q_{omni}^n} \dfrac{{(S/I)}_{120^\circ{}}}{{(S/I)}_{omni}}=\ 3$

$\dfrac{{(S/I)}_{120^\circ{}}}{{(S/I)}_{omni}}\ =\ 3$

n = path loss exponent NI = Number of co-channel interfering cells

q = frequency reuse ratio = D/R

Thus, S/I ratio increases with the increase in number of sectors, but at the cost of additional handoff that might be required for the movement of a user from one sector to another.