1. Spectrum trading: Expect telcos to exit, low bids in auction

Spectrum trading: Expect telcos to exit, low bids in auction

Spectrum trading is expected to reduce the number of telecom operators leading to a higher market share as well as curb aggressive bids in the upcoming auction of mobile airwaves, Fitch and Ind-Ra said.

By: | Published: September 11, 2015 9:04 AM

Spectrum trading is expected to reduce the number of telecom operators leading to a higher market share as well as curb aggressive bids in the upcoming auction of mobile airwaves, credit rating firms Fitch and Ind-Ra today said.

With the new norms that allow telecom operators to sell spectrum, the industry could see emergence of four pan-India players — Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm — while others may exit, according to India Ratings and Research (Ind-Ra).

The agency expects Aircel, Reliance Communications and Tata Teleservices to head to the exit door.

“Aircel may consider exit in Gujarat, Haryana, Kerala and Madhya Pradesh. Reliance Communications may look to monetise its under-utilised spectrum in Jammu and Kashmir, the North-East, and similarly, Tata Teleservices may evaluate exit options for Himachal Pradesh and Rajasthan,” Ind-Ra said.

“The top three telcos, including market leader Bharti Airtel, have increased their combined revenue market share to 73 per cent… their ability to trade spectrum may curtail excessive bidding in future spectrum auctions,” Fitch said.

The government received the highest bid of over Rs 1.1 lakh crore in spectrum auction held in March. Idea Cellular made a bid worth Rs 30,307 crore to purchase spectrum.

Fitch Ratings is of the view that the top three telecom operators — Bharti Airtel, Vodafone and Idea Cellular — may further consolidate their market share by acquiring additional spectrum from smaller telcos, decongest their network, and support their fast-growing 3G/4G services.

Spectrum trading coupled with sharing will spur consolidation as it provides an exit route to smaller loss-making telcos that have struggled to generate positive operating cash flows, the agency said.

“Smaller telcos — including Tata Telecom, Videocon Telecom and Aircel — suffer operating losses, are struggling to gain market share, and are saddled with high debt. These businesses could trade their under-utilised spectrum assets with larger telcos in loss-making Indian circles to focus only on profitable ones,” Fitch said.

Reacting to Fitch observations, Videocon Telecommunications Director and CEO Arvind Bali said: “I think it’s too early for anyone to comment on our financial and business health. We are a long-term and serious player, and we are here to stay.”

Additionally, Fitch Ratings said, the spectrum trading and sharing guidelines are likely to reduce regulatory uncertainty and ease network congestion that can help in reducing call drops.

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