Bharti Airtel’s spectrum debt lowest among peers, analysts

Bharti Airtel Ltd, which spent ₹18,698.75 crore to acquire pan-India sub-gigahertz (sub-GHz), mid-band and 2,300MHz airwaves in the latest 4G auction, has the lowest spectrum debt among the three largest telecom operators in the country, said analysts.

Rival Reliance Jio Infocomm Ltd placed bids for spectrum worth ₹57,122.65 crore, of which ₹34,491 crore was only for purchase of sub-GHz airwaves. Though Vodafone Idea Ltd’s participation was muted in the auction as it holds sufficient spectrum and struggles with stressed financials, its spectrum debt remains the highest among the three.

“Auction spending has caused Jio’s spectrum debt burden to jump 144% to ₹63,100 crore and it is now 10% higher than Bharti Airtel’s ₹57,600 crore…Vodafone Idea’s spectrum burden is still the highest among the three operators at ₹95,400 crore,” CLSA said in a report.

Vodafone Idea bought 11.80MHz spectrum worth ₹1,993.40 crore in five circles.

According to analyst estimates, telcos will have to make an upfront payment of ₹27,900 crore by 31 March, which is higher than the government’s estimate of ₹19,000-20,000 crore. They will be subject to a deferred payment of ₹49,890 crore over 18 years starting March 2024, after two years of moratorium, Axis Capital said in a report.

This implies that telcos will have to shell out ₹6,200 crore annually to meet their spectrum payment obligations, they said, adding that, “the cash outgo will be keenly watched given high debt level of the incumbents and continued delay in tariff hike”.

Of the seven bands put up for sale by the department of telecommunications (DoT), Airtel bid for spectrum in five bands, ranging from 800MHz to 2,300MHz. Billionaire Mukesh Ambani-led Jio bought airwaves in the 800MHz, 1,800MHz and 2,300MHz bands.

In the auction, demand for the 2,300MHz band was the highest, which is predominantly used for 4G in India. This reflects growing efforts of telcos to ramp up their 4G capacity.

Despite the short-term financial challenges, higher 4G spectrum holding will help telcos convert more 2G customers to 4G, leading to improved average revenue per user (Arpu) and deploy 5G service that would shore up enterprise revenues, Axis Capital said.

“Challenges will continue for Vodafone Idea, though we see scope for its continuity as company/government take steps to improve its viability. We see less challenge for Jio and Airtel in making the payments given the recent fund raise by Airtel and deleveraging exercise by RJio,” it said.

Vodafone Idea, which announced its plans to raise ₹25,000 crore in debt and equity in September, is still in discussions with potential investors, even as it continues to lose market share. Livemint