The upcoming spectrum auction, which are expected to be conducted by year-end or early next year, are more critical for Reliance Jio Infocomm than its rivals like Airtel and Vodafone Idea. Worth mentioning here is that Reliance Jio uses 4G airwaves in the 800 MegaHertz band allotted to crisis-hit Reliance Communications, under a spectrum sharing pact, to offer nationwide 4G coverage.
According to a report in a leading business daily, a significant part of RCom’s 800 MegaHertz spectrum will expire in 18 circles between July-August 2021. Even, Airtel and Vodafone Idea need to participate in the auction as their airwaves in eight circles each in the 1800 MHz band, which is less expensive compared to 800 MHz band and is used for 4G rollout, will expire in the near term.
“RCom’s 800 MHz spectrum has played a critical role in Jio’s pan-India 4G launch, and the scenario for Jio is similar to what the incumbents faced when their 900 MHz spectrum came up for renewal around four-five years ago”, the business daily quoted Rajiv Sharma, co-head of research at SBICap Securities as saying.
Experts say Jio may face similar situations that were faced by Bharti Airtel and erstwhile Vodafone India and Idea during the February 2014 and March 2015 spectrum auctions. It may be noted that these incumbent players had to pay exorbitant prices for their expiring spectrum in the 900 MHz band in several circles as they risked losing their mobility business in those circles. Due to this their debt levels rose substantially and led to financial stress.
According to Sharma, an early auction will help Jio regain these crucial airwaves to ensure business continuity and maintain quality of its countrywide 4G coverage.
Jio uses bankrupt RCom’s 800 MHz spectrum through a 21-circle spectrum-sharing pact to deliver countrywide 4G coverage. But those airwaves in 17 circles will expire in July 2021, and in one in August 2021, a person aware of the development told the publication. So, nearly 49 units of 800 MHz across these 18 circles will expire, and around 59 MHz of such spectrum will be up for sale in the next auction, as per the regulator’s recommendations.
Analysts fear that Jio’s debt may increase further if it buys RCom’s spectrum in the 800 MHz band, that may come up for auction, due to high reserve prices. Worth mentioning here is that Trai recommended a base price of Rs 4,651 crore for the paired spectrum in the 800 MHz band covering 19 circles.
Jio had a net debt of Rs 75,000 crore on its books at the end of June 30, 2019. According to a Goldman Sachs report, Jio’s net debt-to-Ebitda at the end of June was six times, compared with Airtel’s 3.4 times.―Times Now