Fitch Ratings has issued a sector-specific special report describing the credit factors the agency uses to analyse the Indian telecom sector on its National Rating scale.
The starting point for assessing Indian telecom companies requires placing their risk profile into a rating range. In this case, Fitch believes that companies in this sector occupy a range extending from 'Fitch BB(ind)' up to 'Fitch AA(ind)'; though some of them may be rated lower or higher based on individual credit characteristics.
Fitch believes that the Indian telecom sector is highly competitive, with about a dozen operators competing in each of the 22 telecom circles in the country. The sector is also highly capital intensive, as telcos need to invest heavily in basic infrastructure to provide services to the large and geographically widespread population (1.2 billion) of the country and to boost the currently insufficient spectrum of 5-10MHz. The sector is also exposed to high regulatory and long-term risks emanating from technological trends.
The next step examines company-specific factors which influence ratings, such as competitive position, diversity of service platforms, infrastructure quality and ownership, financial flexibility and regulatory risk. Finally, the report cites mid-point financial metrics - profitability, cash flows, financial leverage and interest coverage ratios - commensurate with relevant rating categories.
