
According to the India Ratings and Research (Ind-Ra) on Thursday, incumbents like Reliance Jio and Bharti Airtel are not negatively impacted by the recently finished fifth generation or 5G auctions, which give telecom carriers the option to pay in 20 equal annual instalments.
The rating firms stated in a statement that the telecoms have the option of deferring the total spectrum purchase and paying in 20 annual equal instalments, which would ease their capital and liquidity needs.
The agency is of the opinion that Reliance Jio and Bharti Airtel both possess a sufficient cash flow cushion and substantial financial flexibility to meet their obligations for yearly gross revenue dues and spectrum liabilities.
For the respective total spectrum costs of Rs 880.78 billion and Rs 430.84 billion, Reliance Jio and Bharti Airtel are obliged to pay the first instalment of Rs 78.77 billion and Rs 53 billion.
The Department of Telecommunication (DoT) has also eliminated the spectrum usage fees for the spectrum purchased through the auction, which might lower the annual gross revenue (AGR) obligations and perhaps increase the operating margin of service providers.
The largest spectrum has been obtained by Reliance Jio, totalling 24.74 GHz spread across five bands: 700MHz, 800MHz, 1,800MHz, 3,300MHz, and 2.6GHz.
For the 71 percent of the spectrum put up for sale, the Center got bids totalling Rs 150,173 lakh crore.
Given the lack of 5G-capable devices and an ecosystem in India, Ind-Ra thinks that 5G-specific capital expenditure won’t be as aggressive and upfront as 4G.
Analysts predict that Reliance Jio could steal high-end customers from rival Bharti Airtel by using the 700MHz frequency range to boost its speed offerings.
Reliance Jio would have a strong base to improve the quality of its indoor network and 5G coverage even with lower tower densification thanks to the acquisition of 700MHz spectrum across all 22 circles, according to Ind-Ra.
The telecoms won almost 50.831GHz of spectrum across several bands in the most recent 5G spectrum auction for a 20-year term, including 700MHz, 800MHz, 900MHz, 1,800MHz, 2,100MHz, and 2,300MHz.