Companies owned by billionaires Mukesh Ambani and Sunil Bharti Mittal may raise as much as 365 billion rupees selling bonds as the telecom titans build a war chest in what investors hope will be the home stretch in India’s bruising tariff war.
Mittal-controlled Bharti Airtel, which sold its first-ever rupee bond of 30bn rupees last month, has approval to raise 165bn rupees, according to a March 12 filing. Reliance Jio Infocomm announced days later that it plans to sell as much as 200bn rupees of notes, marking the disruptive upstart’s return to the onshore bond market after 20 months.
The fundraising amount - about 78 per cent of the total outstanding bonds of India’s top four telecom firms - signal that the largest carrier and its rival Jio are gearing up to roll out next-generation services and manage about 320bn rupees of debt due in the next five years. Jio stormed into the mobile-phone market in 2016 with free services that set off a tariff war and forced smaller players to merge or exit.
“After four years of intense price pain, the India telecom battle could be in its last stretch,” said Raj Kothari, head of trading at Jay Capital in London. “It’s down to the big boys and they are piling up funds for that.” Bharti said in the filing that the money would be be used for treasury activities, including refinancing, and for paying off spectrum dues. Jio hasn’t specified end use, though it has significant repayments due in the next few years, data compiled by Bloomberg show.
The total debt at four publicly traded wireless operators - Bharti, Idea Cellular, Reliance Communications and Tata Teleservices Maharashtra - has jumped 55 per cent since the end of March 2016 to $34.81bn, data compiled by Bloomberg show. Jio, being a new player, needs to spend aggressively to grab market share, while Bharti is investing more to retain its lead, said Mehul Sukkawala, senior director for corporate ratings at S&P Global Ratings. “This competition could move to the fibre-to-home business in the future and the related bundling of services with fibre.”
Jio secured AAA rating for 150bn rupees of debentures from Crisil which cited the “irrevocable and unconditional” support from parent Reliance Industries Ltd. Crisil rates Bharti’s rupee notes at AA+.