Competitive pressure to continue in telecom sector in 2010: Fitch

Mumbai: Fitch Ratings today said that the outlook for the Indian telecom sector for 2010 ranged from Stable to Negative.

The credit outlook for telcom service providers with stronger balance sheets and comfortable liquidity profiles reamins stable, while its outlook for new entrants and public sector telecom operators was negative.

The revision in the Stable Outlook from 2009 is primarily due to stiff competition and a faster-than-expected decline in tariffs, which has had an impact on revenue and profitability. Fitch notes that the credit profiles of all operators are subject to the event risk of 3G and broadband wireless access (BWA) auctions.

Wireless services are likely to remain the principle driver of industry growth, with penetration still moderate at 43.2 per cent as of the end of November 2009.

Fitch expects this strong subscriber growth to be sustained at a compound annual growth rate (CAGR) of about 25 per cent to 30 per cent over the next three years to calender year 2012, due to network roll-out by new operators and expansion by regional operators across different Indian circles.

However, the rating agency noted that wireless pricing turned aggressive from September 2009, with the major operators reducing tariffs and / or switching to per second billing from the previous per minute format.