The impending spectrum auction is expected to yield Rs 60,000-80,000 crore in revenue due to limited participation from telecom operators who are already under huge debt burden, ratings agency ICRA has said.
"Given the evolving ecosystem around the new bands and steep pricing, ICRA expects limited participation from telecom companies in the upcoming spectrum auctions. Overall, it expects spectrum worth Rs 60,000-80,000 crore to be sold in this auction, which would add to the already sizeable debt levels of the industry," ICRA said in a statement.
The regulator Trai has recommended pricing formula for the next spectrum auction, which is expected to be held in July and has a potential to fetch Rs 5.36 lakh crore to the Exchequer provided all frequencies on the block are sold.
The auction will be the biggest-ever in terms of value and the expected proceeds are would be more than double the gross revenue of the telecom services industry.
In the last auction, the government had realised a record Rs 1.09 lakh crore through spectrum sale.
ICRA said that as per its estimates, consolidated debt level of the industry stood at around Rs 3,80,000 crore in December 2015, against Rs 2,90,000 crore in March 2014.
"Going forward, given the estimated level of participation in the auctions, the industry debt would rise to around Rs 4,60,000 crore, further stressing the capital structure of the industry and deteriorating the debt protection metrics," Sabyasachi Majumdar, senior VP, Co-head Corporate Sector Ratings, ICRA said.
This rise in debt is expected to worsen the gross debt
levels of the industry to around 6.5 times as against the current levels of 5.4 times, it added.
The agency further said organic deleveraging would be challenging for the industry as it would need to maintain the capital expenditure levels in order to sustain the network rollout momentum, especially for data services.
"The stress on the capital structure of the industry comes at a time when the operating metrics are witnessing pressure. The last quarter saw a decline in voice and data realizations for the industry," ICRA said.
It added the concern over the declining trend in realisations, both for voice and data, is aggravated by the impending entry of Reliance Jio Infocomm (RJio).
"RJio is expected to focus on data services and provide stiff competition to the existing telcos. This would adversely impact the pricing power of the entire industry," ICRA said.
It added the only silver lining for the industry has been the recent proposed mergers/spectrum trading deals which can lead to consolidation in the sector, both by way of merger of telcos and of spectrum.
