Fitch expects that the fifth- and sixth-largest operators may manage to break
even in EBITDA terms in 2012.

 

“Although the high level of competition is leading to very weak financial
performance for most Indian telcos, Fitch believes that the credit outlook for
the top-four telcos is stable,” said Nitin Soni, associate director in
Fitch’s Asia-Pacific Telecommunications, Media and Technology team.

 

“The credit metrics of the four largest telcos should improve in 2012,
benefiting from a more stable pricing environment and positive free cash flow
(FCF) generation. However, all operators remain exposed to significant
regulatory risks,” Soni added.

 

Recently, TRAI has said that the number of subscribers who have subscribed to data services has
decreased 9 percent to 346.67 million in Q1 2011-12 against 381.4 million in
the same quarter in 2010.

 

This is despite the agressive roll out of 3G services by all leading operators
including Bharti Airtel, BSNL, MTNL, Aircel, Reliance Communications, Tata
Teleservices, Idea Cellular, etc. This is the first decline in the last 5
quarters, according to TRAI data.

 

In June 2010, the number of subscribers who have subscribed to data services
was 213.81 million. It grew to 274.05 million (September 2010), 332.43 million
(December 2010) and 381.4 million (March 2011).

 

Fitch notes that the final version of the National Telecom Policy (NTP) and
Spectrum Act 2012 should bring much-needed regulatory clarity on the issues of
spectrum-refarming, the imposition of spectrum renewal fees, and one-time
charges for excess spectrum.

 

However, the 10 October 2011 draft NTP proposals to allow spectrum-sharing and
trading, on voice over internet protocol (VoIP) and for the removal of national
roaming charges present a challenge to the top four telcos, according to a
report in Economic Times.

 

Though India is one of the most competitive telecom markets in the world, Fitch
expects that 2011’s stable pricing environment will be sustained through 2012.

 

Bharti Airtel’s initiative to raise on-net voice and SMS tariffs by 20 percent
was followed by most of its competitors. Fitch, therefore, expects average
revenue per minute to remain steady, at about INR0.41-INR0.44, in 2012.

 

The agency believes that the stable pricing environment in 2012 will more than
offset the reduced subscriber growth, leading to higher revenue growth than in
2011. Voice and SMS revenue should continue to dominate the 2012 revenue mix,
while data should contribute only minimal revenue.

 

Fitch expects wireless subscriber growth to fall to an average of 7-9 million
per month (H1 2011: 14 million) due to telcos’ moves to report only active
subscribers and the likely de-linkage of spectrum allocation from reported
subscriber growth. Nevertheless, subscriber growth prospects remain strong, as
active subscriber penetration was just 50.7 percent at end-August 2011.

 

By Telecomlead.com Team
[email protected]