Fitch slugs a negative outlook on telcos for next year
"The outlook for the telecom sector in 2013 is negative, reflecting expected weaker balance-sheets due to regulatory payments to re-acquire licences and continuing limited ability to raise tariffs, given the high level of competition," Fitch said in a research note today.
Government decision to change spectrum-allocation policy from a fixed-cost regime to an auction of all existing and future spectrum assets will significantly raise the cost of licences and spectrum, which will weaken the credit metrics of most telecom firms, if funded by debt, Fitch said.
On February 2, the Supreme Court had cancelled 122 telecom licences on grounds of impropriety in policy implementation. They were allotted by the then telecom minister Andimuthu Raja in 2008 on first-come-first-served basis at throw-away prices to a few players despite having as many as 40 players waiting in line.
Subsequently, the apex court directed the government to re-auction all the 122 cancelled licences.
The government set the base price for auction for all- India spectrum at Rs 14,000 crore, considered to high by the telecom firms. It could garner only Rs 9,704.64 crore on muted response from the industry.
Fitch said the top four operators by revenue market share - Bharti Airtel (Bharti, BBB-/negative), Vodafone, Idea Cellular and RCom - will have to pay significant amounts for a one-off charge for excess spectrum (above 4.4MHz) and re-
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