Reforms package will back 3+1 structure, says Moody’s

It is credit positive for Bharti Airtel, Jio

The telecom sector reforms package announced by the Centre will sustain telcos’ businesses, is credit positive for operators including Bharti and Jio, and provides support for 3+1 players structure, Moody’s Investors Service said on Friday.

Moody’s said the change in the AGR definition to exclude non-telecom revenue will ultimately boost sector-wide EBITDA as it would reduce the licence fees paid by telcos. “Should Bharti opt for the moratorium on payments for past spectrum purchases and AGR statutory fees, we expect this could free up around ₹120 billion-₹130 billion of cash flow annually, which could be used to reduce debt further,” Moody’s said.

For RIL, the removal of SUC for spectrum acquired in future auctions would improve profitability for its telecom operations while the extension of moratorium on payments for past spectrum purchases will improve its cash flow generation and strengthen liquidity.