The home grown ratings agency, Care Ratings has warned that consumers will have to bear the brunt of ongoing aggressive bidding for telecom spectrum, which would force mobile operators to hike tariff. Bids topped Rs 1,08,000 crore on the 13 days, much more than the amount realised from the last auction in 2010 and considerably higher from the government's reserve price of Rs 82,000 crore, with 89 per cent of 2G and 3G radiowaves put on sale provisionally allocated to telecom operators.
The rating agency has said that the ongoing auction would result in more pressure on the companies' debt profile, which is already under pressure, “We expect that operators will further leverage themselves, while customers would have to bear the brunt of tariff hikes which would become inevitable for operators to realise returns on these huge investments.”
CARE has further noted that companies are required to pay 25-33% upfront on their winning bids, which would accrue in revenues of Rs 25,000 crore for the government within this fiscal, ending March 31. It said that given these circumstances, tariff hikes are 'inevitable', adding that moves by third party applications to offer voice service, which contributes the maximum revenue for telcos, is also a threat. Recently, WhatsApp, the most popular instant messaging service used worldwide, has started rolling out the voice calling feature to its users.
A significant percentage of revenues for players are at stake due to impending expiry of spectrum, resulting in buying spectrum to ensure continuity of business. Licences for Idea Cellular’s 9 circles, Airtel’s 6 circles and 7 circles each of Vodafone and RCom are up for renewal.