Airtel unlikely to bid for 700Mhz spectrum, says Fitch

Rating agency Fitch on Tuesday said that Indian telecom leader Bharti Airtel may not bid for premium 700MHz band spectrum in the upcoming auction due to its high price and limited availability of devices.

"We do not expect Bharti to bid in the upcoming auction of 700MHz in India, given the high indicative price for this spectrum, limited device availability and the company's ownership of alternative spectrum (1800MHz/2300MHz) to roll out 4G services," Fitch Ratings said in a statement.

The government is preparing for the next round of spectrum auction in July in which airwaves worth Rs5.66 lakh crore will be put up for sale.

The Telecom Commission has approved a record high base price of Rs11,485 crore per MHz for the 700MHz band. If all available radio waves under this get sold at the price, it alone will yield the government a whopping Rs4 lakh crore.

Fitch Ratings has "affirmed Bharti Airtel's long-term foreign currency issuer default rating and senior secured rating at BBB-", the agency said in a statement.

It also affirmed the same rating for Bharti Airtel International (Netherlands) BV's bonds. This entity manages Bharti Airtel's Africa operation.

The credit rating indicates ability of a company to pay back debt. While AAA ratings denote the highest credit quality, BBB is granted for good credit quality, indicating that expectations of default risk are currently low.

Fitch said that it also does not expect Bharti to make another large debt-funded acquisition given the management's commitment to sell non-core assets to reduce debt.

The company has been on an acquiring spree, with the most recent being broadband wireless spectrum of Aircel for Rs3,500 crore.

Recently Bharti Airtel acquired spectrum of Videocon and wireless broadband supplier Augere in December 2015.

Fitch projected capital expenditure of Bharti Airtel to be around Rs22,000-23,000 crore in the current fiscal ''which includes its core capex of Rs20,500 crore and around Rs. 2500 crore for spectrum payments. The core capex includes investments to improve its 3G/4G networks to compete effectively against Jio and to reduce the frequency of call drops," Fitch said.

The rating agency said that during FY2016, Airtel received about Rs10,500 crore from sale and lease back of towers in eight African countries.

"During financial year 2017, we expect Bharti to receive net proceeds from assets sales, including about Rs. 4,500 crore from the sale of towers and African operations for Rs. 5,800 crore. It will likely use these funds to pay for its spectrum acquisition from Videocon Ltd and Aircel Ltd for Rs. 7,000 crore," Fitch said.