Big telcos to thrive, small ones may fall: Standard & Poor’s

KOLKATA: Top operators Bharti Airtel, Vodafone India and Idea Cellular would strengthen their market positions since smaller, weaker telcos could find it difficult to acquire expensive spectrum and run profitable nationwide operations in a sector which is entering a phase of consolidation, rating agency Standard & Poor’s said.

The views mirror an earlier Fitch forecast, which said the bottom-six telcos were likely to exit as they lacked the requisite airwaves or financial muscle to stay viable in the aftermath of the last spectrum sale that was dominated by Bharti Airtel, Vodafone, Idea and newcomer Reliance Jio Infocomm.

While the new policies on “spectrum renewal, mergers & acquisitions and spectrum trading significantly improve regulatory risks for Indian telecoms ,” the risks will still be above-average compared with those in global markets, S&P said Thursday in a report, titled ‘Moderating Regulatory & Competitive Risks Are Positive For India’s Top Telecoms’.

The lingering risks were due to “ambiguity in past policies,” which had led to legal disputes between the government and the operators, the reason why greater clarity is needed on policies rolled out in 2014. “Ambiguity about the new guidelines and any reversal of policy direction from the regulators, a new government, or the judiciary remained a key risk for India’s telecom industry, although this appeared less likely”, the rating agency said.S&P’s credit analyst Abhishek Dangra added that India’s telecom industry is seeing a “considerable shift in the competitive environment”.

Market leaders may drive competition in contrast to a situation few years ago, when smaller cos like Uninor, Tata DoCoMo, Sistema Shyam shaped competition with price wars. S&P also expects competition in the debt-laden telecom sector to ease as a result of consolidation. While “the data segment may propel the next wave of growth, aggressive and prolonged price wars, could be detrimental to the industry.”