Idea, Aircel got best deal

The high bids for 3G spectrum made by telecom companies will haunt them for some time to come. The high licence fee coupled with the capital expenditure required for rollout of 3G services will push some of the firms into debt. Earnings for the next few years are also expected to be lower because of high debt. While there are no clear winners from the auction some of the players have come out ahead. Aircel and Idea have been winners in terms of getting 3G coverage for their current revenue base, says India Infoline.

The two companies have managed to win 3G licen-ces in areas that account for 79 per cent and 86 per cent of their current revenues, notes the brokerage. Also, the fact that no single player has managed to bag all the circles could be a catalyst for M&A activity in the sector later on. Earnings of the auction winners are likely to fall for the current year, notes Edelweiss, a brokerage house. For financial year 2010-11, the brokerage estimates that Bharti Airtel’s earnings will fall by 3.5 per cent. Idea and RComm are likely to witness a drop of 11 per cent and 4.5 per cent respectively in profits, because of the higher cash outgo, the broker says.