NEW DELHI: Analysts believe that the upcoming 5G spectrum auction, which was cleared by the Union Cabinet on Wednesday, will increase the debt of telecom operators as the Department of Telecom (DoT) has not reduced the reserve price of 5G spectrum.
According to the rating agency ICRA, while the upfront payment is likely to remain low, the total debt on the industry will increase, which is likely to keep the debt metrics subdued. It said debt continues to remain a vulnerable point for the industry.
“TRAI has come out with recommendations of relaxed payment terms, which allow telcos to pay in 20 installments, thus ensuring very low upfront payment. ICRA assumes the participation in the upcoming auction to be around Rs 1.0-1.1 lakh crore, in which the upfront payment is likely to be close to Rs 10,000 crore only,” said Ankit Jain, vice -president and sector head, Corporate Ratings, ICRA. “Adding this to the existing payments, the industry needs to shelve out Rs 17,000 crore annually towards spectrum installments, till the moratorium ends.”
ICRA expects industry debt levels to increase to nearly Rs 5.7 lakh crore as of March 31, 2023, before moderating to Rs 5.3 lakh crore as of March 31, 2025. “Telcos have been focusing on deleveraging: Bharti Airtel recently concluded its rights issue of Rs 21,000 crore and collected 25% as upfront payment, while Vodafone Idea is also scouting for a fundraiser. However, addition of deferred liabilities continues to keep the debt levels elevated,” said Jain.
According to the DoT, the auction will be held on July 27 for spectrums in various low (600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz), mid (3300 MHz) and high (26 GHz) frequency bands with a validity period of 20 years. The Cabinet also decided to set up and develop the private 5G captive networks as it will spur a new wave of innovations in Industry 4.0 applications.
The decision of the government was hailed by the industry players. Satcom Industry Association of India (SIA) said, “SIA-India appreciates DoT’s proposal based on the international best practices to exclude the ka-Band [27.5 –28.5 GHz] spectrum for 5G/IMT auctions.” Peeyush Vaish, Partner and Telecom Sector Leader, Deloitte India, said, “Government has also announced auction of mm Wave band, which will not only help in unlocking the true potential of 5G, but will also help strategically manage costs for the operators.”