Ratings agency Fitch has cautioned that the Indian government’s two-year moratorium on spectrum fees will not offset dues.
India’s cabinet on Wednesday voted in favour of a two-year deferral of payment for spectrum-related fees, but Fitch argues that this will not be enough to mitigate the impact of a recent Supreme Court ruling that broadened the definition of adjusted gross revenue (AGR).
The ruling has increased the debt burden of the country’s operators, with the arrears due for payment within the next three months. Bharti Airtel, Vodafone Idea and Tata Teleservices have filed separate petitions seeking to waive penalties and interest on these dues.
In a statement, Fitch noted that it “has a negative outlook on the [Indian telecoms] sector for 2020 primarily due to heightened financial risk associated with the large unpaid AGR-related dues.”
High debt levels and out-of-control competition mean that ARPU is unsustainably low for India’s operators. The market’s three largest players - Bharti Airtel, Vodafone Idea and Reliance Jio – have announced that from December 2019 they will push up their tariffs.
Fitch welcomed the move, saying “the divergence between Bharti's and Vodafone Idea's financial performance continued in 2QFY20, while Jio continued to report strong revenue and EBITDA growth.”
