5G spectrum buy from Jio, Airtel credit neutral: Ind-Ra – ET Telecom

NEW DELHI: The recently-concluded fifth generation or 5G auctions that offers a flexibility to telecom carriers to pay in 20 equal annual installments, is credit neutral for incumbents such as Reliance Jio and Bharti Airtel, the India Ratings and Research (Ind-Ra) Thursday said.

“The telcos have an option to defer the entire spectrum payment and pay in 20 annual equal installments, which would assuage the liquidity and capital requirement of telcos,” the rating firms said in a statement.

The agency believes both Reliance Jio and Bharti Airtel have the strong financial flexibility and adequate cash flow buffer to cover the annual spectrum liabilities and annual gross revenue dues.

Reliance Jio and Bhart Airtel are required to pay the first installment of Rs 78.77 billion and Rs 53 billion, respectively, for the total spectrum cost of Rs 880.78 billion and Rs 430.84 billion.

The Department of Telecommunication (DoT) has also abolished the spectrum usage charges for the spectrum acquired in the auction, which could reduce the annual gross revenue (AGR) dues and would likely improve the operating margin of service providers.

The Centre received bids of Rs 150,173 lakh crore for 71% of the spectrum put on sale.

Ind-Ra believes the 5G specific capital expenditure would not be as aggressive and upfront as 4G, given the low penetration of 5G-enabled devices and ecosystem in India.

Reliance Jio has acquired the highest spectrum, adding up to a total of 24.74 GHz across five bands – 700MHz, 800MHz, 1,800MHz, 3,300MHz and 2.6GHz.

After 40 rounds over seven straight days, market leader Jio acquired 24,740 MHz of 5G airwaves — which can offer mobile internet speeds 10 times faster than 4G — worth a whopping Rs 88,078 crore, contributing nearly 59% to the central kitty.

The acquisition of 700MHz spectrum in all the 22 circles would provide a solid foundation to Reliance Jio for enhancing its 5G coverage and indoor network quality, even with lesser tower densification, Ind-Ra said.The 700MHz frequency band could help Reliance Jio offer better speeds, and the telco could poach high-end users from rival Bharti Airtel, according to analysts.

In the recent 5G spectrum auction, nearly 50.831GHz of spectrum across various bands —700MHz, 800MHz, 900MHz, 1,800MHz, 2,100MHz, 2,300MHz —was purchased by the telcos for a period of 20 years.

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