Spectrum

The radio frequency rights a telecom operator buys at auction and must renew, representing one of the largest items on its balance sheet.

Payments are typically spread over many years with a deferred component, so the accounting treatment puts an intangible asset on one side and a long-dated liability on the other.

Any leverage analysis of a telecom operator that ignores deferred spectrum liabilities understates the debt substantially. It is the sector's equivalent of the operating lease problem.

Add spectrum obligations to net debt before computing anything.