Reliance Jio, India’s largest telecom operator, is tapping BNP Paribas to raise up to $2 billion in offshore loans. The funds will be used to finance Jio’s procurement of 5G equipment from Ericsson, as the company relies heavily on European vendors, including Ericsson and Nokia, for its 5G infrastructure.
According to reports, BNP Paribas will provide Jio with a substantial sum over a nine-month period. During this period, Jio will utilize the funds to pay for the 5G equipment purchased from Ericsson, in addition to repaying BNP Paribas and other banks involved in the funding process. The financing arrangement is structured as a discounted process, with the implicit interest rate calculated for the nine-month duration.
A notable development is the $2.2 billion insurance coverage provided to Jio by EKN, a Swedish export credit agency. This coverage not only insures Jio’s procurement of 5G gear from Ericsson but also extends to the banks and global lenders associated with Jio. This insurance provides lenders with confidence and helps Jio reduce its overall funding costs.
This insurance coverage is of significant importance since telecom companies in India have yet to monetize their 5G services fully. This puts lenders in a somewhat precarious position, especially with the possibility of further rupee depreciation against the dollar, which would increase Jio’s total dues.
Reliance Jio is making substantial investments in 5G infrastructure and has ambitious plans to expand 5G coverage to every town and city in India by the end of 2023. During the recent Reliance Industries Annual General Meeting (AGM), Mukesh Ambani, Chairman, and Managing Director of Reliance Industries, announced that Jio had already surpassed 50 million 5G customers. This number is expected to rise as more users adopt 5G smartphones, and the reach of 5G networks continues to expand.
