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Telcos’ frequency fee spending rising

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In the shift to higher levels of services, radio frequency costs will increase among Asia-Pacific telecommunications firms (telcos).

Telcos, however, can tolerate increased deferred spectrum liabilities at current levels if these essential costs are the main driver of high debt or weaker leverage, according to Moody’s Investors Service in a new report.

“Deferred spectrum liabilities are distinct from bank or capital market debt and are not subject to refinancing. Moreover, in exceptional circumstances, governments are likely to provide more payment buffers, which can alleviate cash flow pressure for some telcos,” Nidhi Dhruv, a Moody’s vice president and senior analyst, said.

Spectrum fee to debt ratio higher
For emerging markets China, India, Indonesia, Malaysia and Philippines, spectrum liabilities to gross debt will increase to more than 16 percent in 2021 and 2022, from 11.6 percent in 2020 and 9.3 percent in 2018, assuming India completes its 5G spectrum auction in 2022.

In particular, if Bharti Airtel Ltd. (Ba1 positive) spends up to $5 billion at 5G auctions, deferred spectrum and adjusted gross revenue liabilities could make up about 55 percent of its adjusted consolidated debt.

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