Indian telecom network operators are likely to curb their participation during the forthcoming spectrum auctions due to their huge debt.
The spectrum auction, which will be conducted in June / July 2016, will lead to the rise of their debt to Rs 460,000 crore, said credit rating agency ICRA on Thursday.
Top telecoms, which are expected to participate in the spectrum auction, are Bharti Airtel, Idea Cellular, Vodafone and Reliance Jio Infocomm.
“Given the estimated level of participation in the auctions, the industry debt would rise to around Rs 460,000 crore, further stressing the capital structure of the industry and deteriorating the debt protection metrics,” said Sabyasachi Majumdar, ICRA’s senior vice president, Corporate Sector Ratings.
The expected sale of spectrum will be worth Rs 60,000 to Rs 80,000 crore. The telecom industry’s consolidated debt level rose from Rs 290,000 crore in March 2014 to around Rs 380,000 crore by December 2015.
This rise in debt is expected to worsen the gross debt/OPBDITA levels of the industry to around 6.5 times as against the current levels of 5.4 times.
The telecom industry is expected to face cashflow pressures and thereby require additional funding to sustain mobile network roll out momentum.
Some telecom companies have taken inorganic de-leveraging steps by selling stake in certain assets, which, if successful, can bring Rs 30,000 crore to the industry.
ARPU pressure
Gross Average Revenue Per User (ARPU) fell from Rs 183 in Q3 2015 to Rs 173 in Q4 2015. Data ARPU grew from Rs 145 to Rs 162 during the period under review, while voice ARPU dipped from Rs 140 to Rs 127.
Data ARPU of telecoms is driven by increase in usage, while the realizations remain under pressure. Growth in mobile subscriber base and usage is expected to slow down, even though the realizations are not expected to grow materially.
The entry of Reliance Jio Infocomm, the 4G venture of Mukesh Ambani, is expected to drive the competition madder and aggravate the already declining voice and data revenue realizations for telecom companies. Both Vodafone and Bharti Airtel announced their 4G marketing campaign this week. Idea Cellular will follow suit soon.
The merger/spectrum trading deals, which can lead to consolidation in the sector, is a ray of hope. Smaller telecom companies looking to sell their unutilized spectrum holdings to larger players interested in improving spectrum holding outside auctions can bring in network efficiencies.
Bharti Airtel and Videocon Telecom announced their spectrum deal this week. Fitch Ratings say Aircel, Tata Docomo, among others will face continued pressure in the Indian telecom market place.
Vina Krishnan
editor@telecomlead.com
