Reliance Jio, India's largest telecom player, is taking the help of BNP Paribas to raise up to USD $2 billion in offshore loans. Jio wants to use the money to fund its 5G gear purchase from Ericsson. The telco has relied majorly on European vendors, including Ericsson and Nokia for 5G gear. According to an ET report, BNP Paribas will provide Jio with USD $1.9-2 billion over a nine-month period. During this period, the telco will be paying Ericsson for the 5G gear, BNP and some other banks through which it has raised funds. The report mentioned that the funding is through a discounted process.
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The implicit interest rate will be calculated for the nine months as Jio would be paying back the money in that duration. Recently, EKN, a Swedish export credit agency provided Jio with a USD $2.2 billion cover. The cover is meant to insure the purchase Jio is making from Ericsson for 5G gear. Along with that, the cover would also be for the banks/global lenders of Jio. This would put the minds of the lenders at ease and enable Jio to reduce its funding costs.
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The insurance coverage that Jio got from EKN makes a huge difference. This is because the telecom companies in India have not yet started monetising their 5G services and that puts the lenders in an uneasy position. Also, if there's further rupee depreciation against the dollar, then Jio's total dues would rise. Reliance Jio is investing heavily in 5G and aims to bring it to every town and city in India by the end of 2023.
At the recent AGM (annual general meet) of Reliance Industries, Mukesh Ambani said that Jio has already achieved the milestone of 50 million 5G customers. The numbers are only going to rise as more people upgrade to 5G smartphones and the reach of 5G networks expands.
