Mumbai: Global credit rating agency Fitch upgraded outlook for the Indian telecom sector from 'negative' to 'stable'.
Negative outlook meant a possibility of downgrade.
"Of the 10 telcos currently in the market, we believe that six at most can operate profitably in the long-term. Larger companies could cherry-pick smaller operators to acquire spectrum assets, however this might impair credit metrics if funded by debt," the statement said.
An Empowered Group of Ministers recently approved mergers and acquisitions policy for which detailed guidelines are expected to be announced before auction starts in third week of January.
As per the proposal cleared by EGoM, only spectrum purchased through auctions or liberalised by telecom operators by paying one-time spectrum charge can be acquired by a telecom operator without having to pay latest market price for the airwaves.
Government has also fixed the start price for the sale of spectrum in the 1800 mega-Hertz band at a pan-India rate of 1,765 crore (Rs 17.65 billion) per MHz, about 26 per cent lower than the base price in the March sale.
For the 900 MHz band, it approved a rate up to 53 per cent lower than the previous auction price.
Fitch said cheaper pan-India spectrum and the introduction of a flexible payment mechanism for regulatory payments would reduce regulatory risk.
"Furthermore, potentially lower spectrum usage charges - allowing spectrum sharing and trading - would mean cost-savings for most Indian telcos. However, spectrum "re-farming" remains a key risk, which if implemented could cause significant cash outflows for the top three telcos," Fitch said.