India’s telecoms industry has been under a big, dark cloud. From aggressive price wars to the infamous scandal around the allocation of spectrum, the sector has suffered multiple setbacks.
So the new round of spectrum auctions that kick off on Monday are of great interest – they could raise some Rs113bn ($1.8bn) for a government scrambling to meet fiscal deficit targets. The big question is: will operators bid generously or is India set for another embarrassing flop?
Bharti Airtel, India’s largest mobile operator by sales, is looking to issue debt, possibly through a eurobond, according to India’s Economic Times.
Although a bond issue isn’t officially announced yet, the company confirmed to beyondbrics that six banks have announced that Bharti has approached them, asking for meetings to be set up with fixed income investors from Wednesday. The six on the list are Barclays, BNP, Deutsche Bank, JP Morgan, Standard Chartered and UBS. And Moody’s, the credit rating agency, has assigned a rating to the bonds already.
Watching India set its policy on telecoms auctions is like watching a game of tennis – there’s so much back and forth, you get a sore neck.
Although the country is one of the world’s largest and fastest growing telecoms markets, there were few takers at the last auction for 2G spectrum thanks to the high base price the government set. So what’s the latest volley (to prolong the tennis metaphor…)?
Another auction, another disappointment for India’s Department of Telecommunications.
A second round of 2G auctions was scheduled for March 11 but when the “List of Applicants” was published this week, it didn’t actually qualify as a list. Only one possible bidder signed up.
India’s latest 2G telecoms auction was, as beyondbrics reported, a giant flop – it raised barely a quarter of what the government had forecast, as operators balked at what they felt were sky-high reserve prices.
Ratings agencies Fitch and Standard & Poor’s have both threatened sovereign credit downgrades if India doesn’t get its fiscal house in order, and the $7.3bn the government had been planning to raise through the auction was meant to be, at least partly, a measure of its ability to close up its massive fiscal deficit – estimated to be around 5.9 per cent of GDP.
Norway’s Telenor emerged on Wednesday as the biggest buyer in India’s controversial mobile telecom spectrum auction.
Telenor has settled $1.76bn in loans of its Indian joint venture, Uninor – co-owned with real estate developer Unitech – in a sign that the Norwegian company is serious about staying in India despite sky-high 2G spectrum prices.
For a picture of the dire situation most Indian telcos find themselves in, look no further than Bharti Airtel’s quarterly results, released on Wednesday.
Despite a customer base – the world’s fifth-largest – that grew to over 250m, Bharti reported a 37 per cent drop in net profits in the quarter that ended in June, down to $138.5m from $220.8m during the same period last year on $3.5bn in revenues. That fell far below analyst expectations of around $221.2m.
It was not exactly a bolt from the blue. In a move that will have surprised nobody, the Indian government is to ask the Supreme Court to give it more time to arrange a repeatedly delayed rerun of its attempt to sell licences allowing telecoms companies to use so-called 2G spectrum. In spite of its predictability, the latest delay could be dire news for those companies, foreign and domestic, whose 122 licenses were cancelled in February.
Another day, another delay in the organisation of the upcoming 2G spectrum auction in India – a consequence of the corruption-plagued auction of 2008 that led to the jailing of the then-telecoms minister and the revocation of 122 spectrum licences.
On Monday, Sharad Pawar, farm minister, became the latest politician to throw a wrench into the political machine: he resigned from heading the so-called “empowered group of ministers” that has been convened in order to determine the base rates at which the spectrum is to be auctioned.
Less than a month after India’s telecoms regulator shook up the industry by announcing sky-high 2G spectrum prices for the upcoming auction, and on the same day that new research suggested such prices would put operators a further $50bn into debt, apparently the government isn’t quite satisfied – the rates, it seems, were not quite steep enough.
After years of staying out of the 2G scandal, the Indian prime minister seems to be taking a keen interest in the 2G spectrum auction. On Monday, local media reported that he would appoint a minister of state from his office to the committee that will decide the rules of the new auction.
So does that mean the proposed prices might be brought down a bit?