The global credit rating agency Moody's Investors Service has red flagged the latest spectrum auction bidders and has said that telecom companies that bid Rs 1,09,784 crore to retain and enhance their spectrum holdings will have to bear higher costs and debt, reduce future expansion and gradually increase tariffs.
In its latest report Moody’s said that high cost is credit-negative for the country's telecom operators because it will increase their debt and costs and reduce their ability to fund future expansion. Elaborating the views, it said that the thousands of crores of rupees invested by the telcos to buy airwaves in the auction that ended on March 25 will limit their ability to make additional investments over the next 12-24 months, which could in turn slow down the rollout of 3G and 4G networks in India.
Moody’s said that though it expects the companies will raise tariffs in an effort to recover their spectrum costs, but the increases will be gradual, leaving the companies' debt levels bloated for some time. For individual companies it retained its Baa3 stable rating for Bharti Airtel and Reliance Communications and said that it expects Bharti Airtel to fund its upfront payment of about Rs 7,832.58 crore and future payments from cash flows rather than additional debt, while for RCOM, which has to pay Rs 1,106.95 crore upfront, it said that cash from operations will not be sufficient to meet funding needs, which include spectrum payments and capital expenses, over the next 12-18 months.
Start Research-backed Investing ...Now. Subscribe to Sapphire
MoneyWorks4Me is a SEBI-registered Investment Adviser (IA) dedicated to helping investors build long-term wealth through transparent, research-driven, conflict-free guidance. Founded in 2008, we started our journey as a Research Analyst (RA), providing deep fundamental analysis, intrinsic value insights, and long-term investing frameworks for Indian equities. In 2017, we transitioned to a full-fledged SEBI-registered Investment Adviser, strengthening our commitment to acting as a fiduciary—always putting the investor’s interest first.
To become India’s most trusted, research-powered fiduciary advisory platform—where every investor, regardless of experience, can make calm, confident, and well-reasoned investment decisions.
MoneyWorks4Me ensures this through: