Debt levels of telecom companies to rise: ICRA

The proposed spectrum auctions in February, even though it would be a significant event for the industry, would result in raising of the debt levels of the telecom companies.

The total spectrum payout is expected to be Rs90,000 crore to Rs96,000 crore, according to rating agency ICRA.

''The upfront cash inflow for the government this fiscal is expected to be at Rs24,000 crore to Rs26,000 crore,'' said Sabyasachi Majumdar, senior vice-president, ICRA.

''The spectrum auctions would be centered on 900 MHz as the incumbent telcos (Bharti Airtel, Vodafone India and Idea Cellular), who hold sizeable spectrum in this band would be keen to retain their existing spectrum. Change in 900 MHz spectrum holding significantly alters the competitive positioning given its relatively higher spectral efficiency and hence there is expected to be aggressive participation in the auction,'' Majumdar said.

The auction of 900 MHz and 1800 MHz band is expected to result in spectrum payout of Rs65,600 crore for the government of India (GoI). The three incumbents are estimated to account for around 90 per cent of the total value of the spectrum sold, said Majumdar.

The fresh round of spectrum auctions is proposed in February is primarily triggered by license expiries in December 2015 and April 2016.

The DoT would be auctioning sizeable spectrum across four bands – 800 MHz, 900 MHz, 1800 MHz and 2100 MHz.

ICRA expects that the entire spectrum put for sale in 900 MHz band would be sold whereas in 1800 MHz band, some circles are expected to witness muted participation.

Further the final prices in 900 MHz are expected to be higher than the reserve price in most circles whereas the prices in 1800 MHz band are expected to remain in line with the reserve prices.

The 2100 MHz spectrum is also being auctioned in order to address the issue of paucity of spectrum on offer.

DoT has decided to auction the currently available 5 MHz spectrum in 17 circles as against the TRAI recommendation of offering 15 MHz spectrum which is proposed to be vacated by Ministry of Defence (MoD).