Jio in talks with foreign banks for loans up to $1.5 billion

Reliance Jio is currently engaged in advanced negotiations with several prominent global banks to secure a syndicated loan of approximately USD 1 to 1.5 billion (equivalent to Rs 8,200 to 12,330 crore) from offshore sources.

The purpose of this funding is to finance the procurement of 5G network equipment from Ericsson, a leading Swedish company. As India’s largest telecommunications operator, Reliance Jio aims to introduce next-generation mobile broadband services nationwide by December 2023.

Notable banks involved in the discussions include HSBC, JP Morgan Chase, Citi, and others. They are expected to arrange a loan for Jio spanning a duration of three to five years. The loan will likely be priced above the Secured Overnight Financing Rate (SOFR), a newly established global benchmark rate. According to sources familiar with the matter, the loan’s interest rate may range from 100 to 150 basis points higher than the SOFR.

According to a media report, discussions are ongoing, and Jio is on the verge of finalising the selection of bankers as it prepares to purchase 5G radio network equipment from Ericsson.

Separately, Finnvera, a European export credit agency, is expected to provide guarantees to the lenders to support the offshore loan extended to Jio. These guarantees are likely to enhance the confidence of foreign lenders by reducing overall funding costs.

A banker mentioned that there is considerable interest from export credit agencies, particularly in Western countries and regions like Korea, to support well-rated firms like Reliance due to mutual benefits. The upcoming syndicated loan, following a similar round of funding for the purchase of Nokia’s equipment, is projected to be at least USD 1 billion in size.

Under the leadership of Mukesh Ambani, Jio has been rapidly expanding its 5G coverage since October of the previous year, with the goal of achieving nationwide availability by the end of this year. Currently, 5G services have been rolled out in approximately 5,700 cities and towns.

Jio has committed to investing a total of USD 25 billion in 5G infrastructure, with USD 11 billion already spent on acquiring 5G spectrum. Market research firm Sanford C. Bernstein predicts that the remaining USD 14 billion in capital expenditure will be allocated to network assets and customer equipment.

Jio, being the exclusive holder of 5G airwaves in the highly sought-after 700 MHz band, has chosen the standalone mode for its nationwide 5G network deployment. The company primarily collaborates with European network vendors Ericsson and Nokia for its 5G implementations. BW Businessworld