Kolkata: Reliance
Jio Infocomm has outperformed older rivals
Vodafone Idea and
Bharti Airtel in the fiscal third quarter, but all three mobile phone companies need to reduce debt in a hurry with leverage at uncomfortably high levels, say analysts.
While Jio showed strong revenue and profit growth in the October-December quarter, both incumbents have shown early signs of revenue recovery with initial effects of the minimum recharge plans kicking in, coupled with strong
4G subscriber additions, despite posting losses for their India operations.
With a net debt to earnings before interest, tax, depreciation & amortization (Ebitda) of over 25x, reducing liabilities holds the key to Vodafone Idea’s ability to expand 4G operations to catch up with competition, say analysts. They add that Jio’s similar ratio, which is around 6.9x, is also the trigger for the new entrant looking to expeditiously sell stake in its soon-to-be-demerged tower and fibre units. Bharti Airtel’s consolidated net debt to Ebitda is 4.2x.
Brokerage
CLSA pegs Jio’s net debt at Rs 1,12,100 crore, including Rs 21,100 crore in spectrum liabilities due to the government at December end. The company clocked an Ebitda of Rs 4,053 crore in the third quarter ended December, which annualizes to over Rs 16,000 crore, putting the new entrant’s leverage ratio at around 7x, according to analysts.
CLSA analyst Vikas Jain expects Jio to close a deal within the first half of calendar 2019 to monetise its tower and fibre assets, which would “deleverage a big chunk of its (overall) debt” and make it asset light. Canada’s Brookfield is reportedly in talks to buy those assets, which are in the process of being demerged into two separate units.
Jio, which reported its fifth straight profitable quarter with a 65% on-year jump in bottom line to Rs 831 crore, has said it is open to selling controlling stakes in these assets to make them independently-owned companies. Its quarterly finance costs rose 9.5% sequentially.