Shares of telecom services companies are under pressure on the bourses on concerns of increase in the debt burden due to the Telecom Regulatory Authority of India (Trai)’s recommendations on spectrum auction.
Indian mobile operators’ financial performance will be impacted by the recommendations due to the proposed heavy spectrum costs, according to a report by accounting firm PricewaterhouseCoopers (PwC).
In the past the operators have absorbed cost increases but the paper suggests that the industry will not have the capacity to do the same in the future given their steadily eroding profit margins and their unsustainable debt service burden. The paper states that India now has the lowest operating margin for the telecoms industry in emerging Asia, it added.
“Assuming the spectrum acquisitions as set out by Trai in its recommendations are debt-funded, we estimate that the industry will need to further increase its current debt burden of Rs 185,720 crore by Rs 272,000 crore over the next five years,” the PwC report said.
Among the individual stocks, Bharti Airtel has dipped 4% to Rs 282.55, its lowest level since July 2010 on the National Stock Exchange. Idea Cellular has plunged 5% to Rs 74.05 and Reliance Communications by 2% at Rs 63.05.
