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NEW DELHI: The telecom sector's debt is likely to escalate to as much as Rs 6 lakh crore by this fiscal end following the spectrum purchase outgo, and network upgradation<\/a>, two research analysts separately said.
“Post the auctions, the debt levels of the industry<\/a> would increase further to around Rs 6 lakh crore as on March 31, 2023, with the addition of the spectrum liabilities<\/a>,\" Ankit Jain, Vice President & Sector Head, ICRA said.
Further, Delhi-based credit rating agency said that on the back of annual installments for spectrum payment coming to Rs. 13,365 crore for FY 2023, the cash outgo would stand at Rs 19,600 crore for FY 2024 and FY 2025 each, before increasing to Rs 65,500 crore from FY 2026 onwards.
Incumbent operators that included newcomer Adani Data Networks<\/a> have bought 51,236 MHz of spectrum across bands for Rs 150.173 lakh crore in an auction concluded on Monday.
Mukesh Ambani-owned Jio<\/a> purchased a maximum of 24,740 MHz of spectrum at Rs Rs 88,078 crore followed by Sunil Mittal-driven Bharti Airtel's 19,867.9 MHz for Rs 43,084 crore, and Vodafone Idea bought 6,228 MHz at Rs 18,799 crore.
\"This is the highest-ever spend on spectrum auctions, partly driven by upgradation in technology to 5G<\/a> and partly by relaxed payment terms. This amount will be in the form of a 20-year deferred spectrum debt at a 7.2% interest rate, which eases the repayment burden for the industry for this auction,\" Jain said.
The mid band (3300 MHz) and the 26 GHz bands were the most sought after, which would enable telecom operators to launch commercial 5G services. Further, the 700 MHz band which went unsold in the last two auctions, witnessed participation, with Jio purchasing 10 MHz across all 22 circles.
\"Additional spectrum purchased in this auction could elevate the sector’s debt to Rs 6.1 lakh crore. Therefore, the sector’s debt\/Ebitda is expected to rise to 4.6x in the current fiscal, compared with 4.2x as on March 31, 2022,\" said Manish Gupta, Senior Director, CRISIL Ratings<\/a>.
The telecom sector, according to Gupta, is characterised by high capital intensity as it requires continuous investments for technological upgradation and spectrum purchase.
\"Telcos have already invested nearly Rs 5 lakh crore over fiscals 2017-21 to roll out 4G services, resulting in the sector’s gargantuan debt (including lease liabilities) of Rs 4.73 lakh crore as on March 31, 2022,\" CRISIL analyst added.
The Department of Telecommunications expects telecom service providers to deposit the first annual instalment towards spectrum purchase by August 10.