According to IIFL Securities, Bharti Airtel may spend Rs 400 billion to buy 5G spectrum in the 700 MHz band in the next sale to stay competitive in the long-term and avoid the risk of these premium airwaves getting allocated to state-run telcos. The firm also added that while Airtel may not need additional low frequency (sub-GHz) spectrum for 5G services in the next two years, it faces the risk of 700MHz spectrum getting allotted to public sector undertakings (PSUs) by the government if it skips the auction of these airwaves in 2023.

The brokerage, though, downplayed the business implications of any temporary debt hike, saying the operator has the flexibility of calling 75 per cent of its Rs 210 billion rights issue proceeds, steady revenue market share (RMS) gains coupled with rising average revenue per user (ARPU), which should keep the telco’s leverage in check.

Till date, Airtel has so far raised only around Rs 52.47 billion in the first tranche of its Rs 210 billion rights issue, and the balance sum can be garnered once the telco decides to make the two additional calls. As per IIFL, Airtel has the option of re-farming 900MHz band for 5G. However, with 4G likely to be in use for the next few years, the telco’s significantly lower holdings in the low frequency bands as compared to Reliance Jio may not be adequate to support 5G, 4G and potentially 2G simultaneously, and hence IIFL believes that the operator may eventually have to bid for 700MHz spectrum.