Financial services companies and credit agencies on Tuesday gave a thumbs down to the new Draft National Telecom Policy (NTP), saying that it did not give clarity on critical issues.
Fitch Ratings said that the draft policy focused on new long-term regulatory guidelines but does not address the details underlying shorter term credit concerns.
Fitch's key sector credit concerns include the imposition of one-time charges for excess spectrum over 6.2MHz, spectrum renewal fees, spectrum re-farming, higher spectrum charges and rigid M&A regulations.
“Regulatory risk for Indian telcos is significant and larger telcos, including Bharti Airtel, could face significant cash outflows over the medium-term due to regulatory decisions,” said Mr Nitin Soni, Analyst in Fitch's Asia-Pacific TMT team.
Fitch said that proposal to remove roaming charges is negative for Indian telcos as the loss of roaming revenue (4 per cent-7 per cent of revenue) is likely to more than offset any positive effect of lower subscriber churn.
Angel Broking said that the NTP-2011 defined objectives that were directionally positive. However, no direct financial impact could be assessed at this juncture. “The NTP emerged as a non-event for the Indian telecom sector,” the broking firm said.
Emkay Global Financial Services said it anticipates that EBITDA for FY13 would get negatively impacted by 2.5 per cent, 6.3 per cent and 2.5 per cent for Bharti, Idea and Rcom, respectively, if roaming charges are abolished. “The policy indicates long-term vision and objectives but the ongoing spectrum related issues remained unresolved,” according to analysts at Emkay.
Prabhudas Liladher said: “The Draft Telecom Policy announcement has laid out a broad directional framework for the policy but the lack of details will lead to continued uncertainty on many key issues.”
However, industry body Assocham said the policy lays down the vision and roadmap to meet the Government objectives for the next decade. “There are several forward-looking proposals contained in the draft policy document,” said Mr Dilip Modi, president of Assocham. “If implemented in a fair, equitable and transparent manner, they hold the key to resurgence in the telecom sector.”