2G verdict could hasten consolidation: Avendus

03 Feb 2012

1

The cancellation of 122 2G licenses is likely to induce consolidation in the Indian telecom industry and enable pricing stability. The bank funding for 2G spectrum is estimated at 0.2 per cent of non-food loans, a large part of which may already have been restructured or have turned into non-performing loans.

Therefore, the incremental impact on asset quality is likely to stay low. Also, transfer of assets to incumbents may improve the viability of the business and improve the debt-servicing ability, investment banking services firm Avendus said.

Idea Cellular may bid and win back spectrum in the seven circles where licenses are to be cancelled. However, the additional cash outgo is likely to weigh on earnings, it said.

While holders of cancelled licenses can continue operations for four more months, they could re-acquire the spectrum through auctions. However, it is uncertain if all 122 licensees may bid in the spectrum auctions to be held later.

Idea Cellular may participate in spectrum auctions to maintain its pan-India presence. There is limited clarity on refund of the license fees paid for the licenses ordered to be cancelled.

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