Comments
The Supreme Court's decision to cancel 122 2G licences on Thursday would hasten the process of consolidation in the business of mobile telephony, say telecom industry experts.
“A large number of non-serious players had entered in the last decade and though consolidation was expected, it was unclear how it would happen, and now this decision would see that it becomes a reality,” said a telecom analyst of an Indian brokerage. Those in the trade observe that these cancellations will put newer players on the back foot and result in lesser competition in every circle.
“Though there is an expectation of a hike in mobile bills by 20 per cent in the near future it is unlikely to happen as there is excess capacity in the system, already,” observed another telecom analyst with another Indian brokerage.
“And with fresh bidding, new operators may not bid for every circle as the new licence fee is not known.”
Experts tracking banks expect additions to the gross NPAs of those banks that have lent heavily to the telecom sector.
“In fact we expect banks to start recovering loans from new telecom operators,” said Mr Dinesh Shukla, banking analyst, Sharekhan.
“Banks may also ask for a higher percentage as collateral for existing loans and fresh disbursals to telcos. “Even if the government refunds the spectrum fees to those whose licences have been cancelled, crores of rupees have gone into setting up telecom infrastructure which is a sunk cost and a large portion of this cost was funded by telcos through bank debt,” said Mr Shukla.
No more cheap loans
On the other hand analysts tracking the banking sector fear that fresh loans to new telcos may not come cheap.
“It will be difficult for new operators to raise debt and even if they manage to, the cost would be prohibitive,” said Mr Abbas Merchant, Senior-AVP Research Jaypee Capital.
Analysts said that it will take some more time for banks to ascertain the actual impact of this decision.
Any further exposure to this sector would also hinge on the spectrum fee the Government intends to levy.
> raghavendrarao@thehindu.co.in
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.