Agency says new norms will spur consolidation as it provides an exit route to smaller loss-making telcos

New Delhi : Ability of telecom operators to trade spectrum may curtail excessive bidding in future auctions, credit rating agency Fitch said. “The top three telcos, including market leader Bharti Airtel, have increased their combined revenue market share to 73%… their ability to trade spectrum may curtail excessive bidding in future spectrum auctions,” Fitch said.

The government received the highest bid of over Rs 1.1 lakh crore in spectrum auction held in March. Idea Cellular made a bid worth Rs 30,307 crore to purchase spectrum. Airtel’s stood at Rs 29,130 crore while that of Vodafone read Rs 25,959 crore.

Fitch Ratings feels that   Bharti Airtel, Vodafone and Idea Cellular — may further consolidate their market share by acquiring additional spectrum from smaller telcos, decongest their network, and support their fast-growing 3G/4G services. Spectrum trading coupled with sharing will spur consolidation as it provides an exit route to smaller loss-making telcos that have struggled to generate positive operating cash flows, the agency said.

Reliance-Jio-RCom tie up

“Specifically, these new rules are credit positive for the fourth-largest telco — Reliance Communications — which can now reduce leverage through monetising its under-utilised pan-India 800 MHz spectrum,” it said.

The agency expects Reliance Jio, RIL’s telecom subsidiary, which is reportedly planning 4G services launch in December 2015, to acquire 800 MHz spectrum to provide better indoor coverage as it owns the spectrum only in 10 circles.

“RCom could be a source of this spectrum as it has continuous spectrum bandwidth in 800 MHz and already has a reciprocal infrastructure agreement with Jio,” the agency said.

A report of Bank of America-Merrill Lynch also expressed similar views, which said RCom could liberalise its 800 MHz spectrum and hand it to Reliance Jio for 4G services. Jio could possibly partner with RCom post trading and sharing,” the BofA-Merrill Lynch report.

“Smaller telcos — including Tata Telecom, Videocon Telecom and Aircel — make operating losses, are struggling to gain market share, and are saddled with high debt. These businesses could trade their under-utilised spectrum assets with larger telcos in loss-making Indian circles to focus only on profitable ones,” Fitch said.

Under the guidelines, telecom operators can outright transfer spectrum held by them to the other company.

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