Analysts, Telecom News, ET Telecom

Calcutta: Potential annual cash flow relief of over Rs 16,000 crore from the authorized four-year moratorium on statutory payments will give Bharti Airtel and Reliance Jio the financial leeway to participate aggressively in the sale of 5G waves likely early next year, analysts said.

Nomura Group estimates that the moratorium “will provide Airtel and Jio with up to Rs 11,900 crore and Rs 4,300 crore, respectively, in annual cash flow relief”, if both opt for the offer announced under a government plan for the telecommunications sector. They could invest the funds in 5G networks, he said.

Bharti chairman Sunil Mittal said Airtel will opt for the four-year deferred option for Adjusted Gross Income (AGR) and spectrum payments. Jio hasn’t taken a call yet.

Moratorium to grant Airtel and Jio cash relief of Rs 16,000 crore / year: analysts
Different types of earnings for Vi

In Jio’s case, however, the amount of relief is lower than the other two, as the market leader only has statutory payments for spectrum-related liabilities and not for AGR.

Vodafone Idea (Vi), weighed down by Rs 1.9 lakh of debt and with a cash balance of Rs 920 crore, should also opt for deferred payment and make the most of it.

But, as it stands, analysts don’t expect cash-strapped Vi to participate as heavily in the 5G auction as others if he is unable to close. its much-delayed fundraising of Rs 25,000 crore. The company hopes the back-up plan will help build investor confidence, which will help it secure the funding quickly.

Jio and Vi did not respond to questions from ET until press time on Friday.

At Vi, the annual cash relief of Rs 24,000 to 25,000 crore that it is likely to obtain will be mainly used for debt reduction and much-needed investments in expanding existing 4G networks, depending on the market. experts.

Another “positive” for the cash-strapped telecommunications company is the government’s decision to allow the return of surplus spectrum after a 10-year freeze from the year of the auction. Vi, at a loss, has “significant spectrum content” currently unused, which it had outbid in the past, JM Financial said.

“Vi has not yet indicated the extent of the unused spectrum, but we estimate that there could be savings of 5,000 crore rupees per year if Vi gives up the unused spectrum,” he said.

However, they warned that despite the four-year postponement of statutory payments, the financial challenges of the telecommunications joint venture between Britain’s Vodafone Plc and India’s Aditya Birla group were not over as interest accrued during the period of Four-year moratorium would further exacerbate the phone company’s huge Rs 1.9-lakh debt.

Next spectrum sale

However, the success of the sale of 5G spectrum will depend on the government’s lowering the base price of the airwaves, analysts said. The current price of Rs 492 crore per unit for 5G waves in the 3300-3600 MHz band has been deemed too expensive by operators.

Telecommunications Minister Ashwini Vaishnaw recently told ET that India’s Telecommunications Regulatory Authority is looking at the pricing aspect. “However, if rationalization is necessary in the public interest, why should the government not do it? ” He said.

ICICI Securities expects Airtel and Jio to also benefit from the upcoming auction due to revised spectrum acquisition standards, under which the waves auctioned will incur no spectrum usage fees and the guarantee of the deferred liability of the spectrum will not require bank guarantees.

All three operators say they already operate 5G-capable networks. During the last spectrum sale in March, Airtel and Jio had multiplied on the airwaves to respond to increased data usage amid the pandemic and also prepare for the future ahead of the 5G rollout. . Vodafone Idea had largely remained out of this auction.

Analysts believe that creating an auction schedule would allow telecom operators to stagger their spectrum purchasing decisions in line with scale-up plans, and the 30-year longer waves would help improve traffic flows. Treasury.

Experts welcome the bold measures announced by Cabinet on Wednesday.

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