Almost all funds committed by Indian telecom firms to secure spectrum at the auction may come by way of debt, which will further stress their balance sheets and make telecom services more expensive.
The auction for wireless spectrum, which concluded on March 25, saw the government garner close to Rs 1.1 lakh crore in revenues. The combined debt of Indian telcos who bid for spectrum may go up by a similar amount, Rajan S Mathews, director general of COAI.
The combined debt of Indian mobile telephony firms stands at around Rs 2.5 lakh crore and this may increase to Rs 3.5 lakh crore as companies look to secure funds to pay the government for the airwaves.
The anticipated increase in debt levels could lead to
telecom operators passing on the cost of such increased borrowings to subscribers; thought doing so has its own share of challenges.
Cellular Operators Association of India (COAI), a telecom industry lobby, said in a statement issued on Thursday
that the increased financial
burden arising out of the spectrum auctions will leave operators with no choice but to increase tariffs in order to meet the financial commitments to the government.
“The outcome of this auction, in whichever manner,
will eventually lead to a significant outflow of funds and
further burden on the industry… The increased financial burden will lead to the industry’s
cost structure being changed drastically,” COAI said in the statement.
The net debt of the country’s largest telecom operator, Bharti Airtel, stood at Rs 57,280 crore as on December 31. Idea Cellular’s net debt stood at Rs 11,978 crore in the same period, and Reliance Communications'(R-Com) net debt was at Rs 50,302 crore.
According to estimates, Vodafone bid the highest at
Rs 34,500 crore at the auctions, followed by Idea cellular at
Rs 28,000 crore, Bharti Airtel
Rs 27,500 crore, Reliance Jio
Rs 11,000 crore and Reliance Communication Rs 2,300 crore.
Telecom sector analysts say that companies with low leverage like the Aditya Birla Group’s Idea Cellular and Reliance Industries (RIL)-controlled Reliance Jio (Rjio) would be in a better position to shoulder the financial burden of securing airwaves for their 2G, 3G and 4G data and voice services, than highly leveraged and smaller entities like R-Com.