The high bids for 3G spectrum made by telecom companies will haunt them for some time to come. The high licence fee coupled with the capital expenditure required for rollout of 3G services will push some of the firms into debt.
Earnings for the next few years are also expected to be lower because of high debt. While there are no clear winners from the auction some of the players have come out ahead.
Aircel and Idea have been the clear winners in terms of getting 3G coverage for their current revenue base, says India Infoline.
The two companies have managed to win 3G licences in areas that account for 79 per cent and 86 per cent of their current revenues, notes the brokerage.
Also, the fact that no single player has managed to bag all the circles could be a catalyst for M&A activity in the sector later on.
Earnings of the auction winners are likely to fall for the current year, notes Edelweiss, a brokerage house.
For financial year 2010-11, the brokerage estimates that Bharti Airtel’s earnings will fall by 3.5 per cent. Idea and Reliance Communication are likely to witness a drop of 11 per cent and 4.5 per cent respectively in profits, because of the higher than expected cash outgo, the broker says.
All eyes are now on the auction of the BWA — broadband wireless access — spectrum, which is set to start in the next few days. With 11 players bidding for just two slots, bidding may be even more fierce than the 3G auction.
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Trai prepares 4G proposals
New Delhi, May 20: Telecom regulator on Thursday said it plans to bring out the recommendations on the fourth generation (4G) technology by the yearend.
The chairman, Mr J.S. Sa-rma, said Trai plans to bring out a consultation paper on the 4G in the next two-three months. “Before the year-end, we should be ready with recommendations on 4G,” he said. — PTI