Mobile phone carriers’ airwave bids raise debt concerns – Economic Times
Bharti, Vodafone and Idea – the top three Indian carriers – bought a combined $8 billion worth of airwaves in a government auction that ended on Thursday. Overall, seven companies spent a total of $10 billion at the auction.
Bharti Airtel shares were up 0.7 per cent by 0948 GMT, having risen as much as 4.8 per cent earlier on Friday. Idea was up 0.5 per cent, cutting gains after rising up to 5.7 per cent. The stocks have underperformed the broader market this year on concerns over spectrum bid worries.
Carriers will need to pay a quarter to a third of their winning prices upfront, and the remainder through 2026 in annual instalments with a 10 per cent interest.
Even when spread out, the payments will add to a combined debt burden of more than $33 billion in the telecoms sector, lead by Bharti Airtel’s more than $9 billion. Vodafone India has a net debt of about $4.7 billion.
“They have fended off the competition but that has come at a cost of stretching the balance sheets of the incumbents,” said U.R. Bhat, managing director at Dalton Capital Advisors, which advises foreign investors in India.
The auction, which started on Feb. 3, heated up with conglomerate Reliance Industries’ unit applying to bid. Analysts said the new competitor, Reliance Jio, may have led to higher priced bids from incumbents, even if it did not end up actually winning any spectrum in the 900 megahertz band.
With its $1.8 billion airwave purchase in the 1800 megahertz band in 14 service areas that account for about 70 per cent of the sector’s revenue, Reliance Jio gains entry into the dominant voice services.
Reliance, which already owns 4G airwaves on a different band but has yet to launch services, said on Friday it would also rollout 4G on a popular technology using the new airwaves.