As the auction for mobile licenses starts on February 25, 2015 it will put some of the key telecom service providers in India at war against one another. At the same time this is expected to increase their risk of debts. The auction is expected to raise INR96,000 crore which includes funds from some of the top most billionaires such as K.M. Birla, Sunil Mittal and Anil Ambani.
According to Icra Ltd the rule for the auction is to pay INR25,000 crore upfront. Sabyasachi Majumdar, Icra’s senior vice president stated, all the bidders will try to save their own turf. He further added that this replacement cost will only negatively impact the balance sheets without adding to the necessary cash flows.
Icra further added that this auction will help in reducing debt that the companies created in 2014. Bharti Airtel Ltd’s 2023 dollar bonds yield shot up by 16 basis points after it touched a low of 3.81% on 15 January. Bharti Aitel had cut down its debt by 11% in six months till September, after it recorded a sevenfold profit in last four years. Paying for the account may lead to a setback of 20% to Bharti’s balance sheet and 60% for Birla’s Idea Cellular Ltd.
Suresh Rangarajan, Vodafone India Ltd spokesman, Ashutosh Sharma, Bharti’s spokesperson, and Idea’s Rajat Mukarji refused to comment on the issue of companies’ way of making payments for the upcoming spectrum auction.