KOLKATA: Reliance Jio Infocomm may be pushed to raise prices in this financial year as it needs to spend about Rs 9,000 crore a year on its long-term capacity leasing deals with special purpose vehicles (SPVs) created to hold its demerged fibre and towers assets, coupled with the capital raising plans of rivals Vodafone Idea (VIL) and Bharti Airtel, said analysts. Analysts said Jio’s tower and fibre SPVs, managed by infrastructure investment trusts, removes refinancing requirements for the country’s youngest telco but would encumber it with a material cash cost in the early years since Jio has inked a 20-year pact for 50% of the fibre capacity and is also the anchor tenant on the 175,000-odd towers. This challenges our understanding of the wireless business being an inherently high operating leverage one, and Jio has been remarkably consistent in challenging our understanding of the business,” Kotak said in a note seen by ET. Analysts say a reason could be that Jio is capitalising lesser than previously its depreciation and amortisation costs, and recognising more in the P&L as coverage reaches 99% of the country’s population. JM Financial said Jio is set to emerge as the biggest telco in the quarter to March 2019, on the strength of its Rs 11,100 crore revenue that is likely to exceed market leader VIL’s estimated Rs 10,900 crore in the same period.
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