Telcos to Get Relief by AGR Moratorium, Can Boost 5G Spectrum Sale

Analysts have said that cash flow reliefs for the three telcos due to the telecom relief package will give them enough headroom to compete in the upcoming 5G spectrum sale.

AGR Moratorium - Who's Going for It?

For now, only Bharti Airtel has publicly announced that they will go the moratorium route. However, given Vodafone Idea's situation, it will go for it as well. However, Reliance Jio has not said anything on the matter thus far.

Nomura Group said that the moratorium will, "provide Airtel and Jio as much as Rs. 11,900 crore and Rs. 4,300 crore, respectively, in annual cash flow relief". It added that the telcos can invest the saved funds in 5G spectrum sale and networks.

However, Vodafone Idea stands to benefit the most from the moratorium, as the telco looks at an annual cash flow relief of Rs. 25,000 crore. However, experts say that the telco will invest the saved money in existing 4G networks and debt reduction.

JM Financial pointed out that since the government has now allowed for surrendering unused spectrum, Vodafone Idea can further look to reduce its liability. The brokerage said that Vi has “significant spectrum holding” currently lying unused.

Telcos to Go Big in 5G Spectrum Sale?

Even though the operators now will have more money to play with at the auction, the base price of Rs 492 crore a unit for 5G airwaves in the 3.3-3.6 GHz band will still look too expensive. Therefore, the success of the 5G spectrum sale will depend on whether the government lowers this price.

ICICI Securities has predicted Airtel and Jio to benefit from the revised spectrum acquisition norms. Notably, these norms have ditched SUC and deferring spectrum liability will not need any BGs. However, Vodafone Idea is looking the weakest competitor at the 5G spectrum sale. The situation will worsen if the telco does not close its fundraising soon.

Last auction had seen Airtel and Jio pick up a lot of airwaves; Vodafone Idea had stuck to renewing spectrum at that auction as well. The former two telcos already co-own a crucial sub-1 GHz band for 5G.

As the telecom minister had announced, an auction calendar can allow telcos to spread their spectrum buying across a longer time, improving cash flows.