Spectrum auction to widen telco debt
NEW DELHI: Top bankers expect the liability level of India’s telecom giants, which stands at about Rs 3 lakh crore as of September this year, to expand as firms bid for 4G spectrum in the auctions set for March 2021. Airwaves worth an estimated Rs 3.92 lakh crore are going under the hammer in this round.
“Most of the telecom firms remain highly leveraged but they will need to borrow to bid for these auctions. More debt without cash flow improvements could be troublesome, so banks would have to think many times before coughing up the money,” said Sanjay Bhattacharyya, former managing director of the State Bank of India.
As of September 2020, Bharti Airtel had about Rs 1.29 lakh crore in debt, and Vi about Rs 1.7 lakh crore in net debt and dues to the Government. Reliance Jio is the only telco that has managed to turn debt-free, having sold nearly a third of its equity.
Bankers say that though upfront payments for spectrum would be far less, with the rest to be paid over 16 years, “this still represents a fat sum of nearly Rs 1-1.5 lakh crore”. To be able to access that kind of credit, firms would need strong corporate guarantees and stronger proof of cash flows. As of date, most telecom players in India are bleeding.
Bharti Airtel reported a net loss of Rs 763.20 crore in the quarter ended September 2020, while Vodafone Idea’s net loss for the period was Rs 7,218 crore. Excepting Airtel, no telecom firm recorded double digit revenue growth in the quarter.
This is possibily why many analysts expect the auctions to yield far less than the total worth of airwaves being offered. “We expect moderate participation in the upcoming uctions, largely limited to renewal of the expiries in the 800 MHz and 1800 MHz bands,” said Ankit Jain, Assistant Vice President, ICRA. This would leave little participation in the 700 MHz band, according to the rating agency, which expects the auctions to fetch between “Rs 55,000-60,000 crore” for the exchequer, or about 15 per cent of the amount the Government is expecting.