Bharti Airtel Q3 net profit sinks 72% at Rs 284 cr
spectrum payments and the likely return of pricing power. This is despite the persistence of regulatory uncertainty over the final auction price of the 900MHz spectrum in March 2013.
Bharti's January 2013 decision to double its voice tariff to INR2 per minute from INR1 per minute in phases will help the company to deleverage in FY14. Fitch believes that this move indicates a likely first sign of a return in pricing power, as competitive intensity abates due to the exit of some operators, on-going operating losses for weaker telcos and high spectrum prices.
Regulatory risk surrounding spectrum-related cash outflows is now fading because the government has allowed telcos to pay the one-time fee for excess spectrum over 6.2MHz in phases over the life of the licences. Furthermore, spectrum prices could come down further in 2013 from the reserve price used in the last auction held in November 2012. Such payments too can now be paid in phases as announced by the regulator in late 2012.
Bharti can partially pay a one-time spectrum fee of INR52bn (USD963m) with proceeds from its December 2012 sale of its stake in its Tower arm - Bharti Infratel - for which it received USD583m. Also, the Indian government's decision to allow such fees to be paid in phases - one-third upfront and the rest over the remaining life of the license - will help the company in managing its cash flows.
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