Fitch downgrades PSUs, new telcos' outlook to negative

Global rating agency Fitch today downgraded its outlook for the new entrants in the domestic telecom sector as well as the public sector telcos for 2010 is negative.

"The revision from 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 said in a report here today.

Fitch notes that the credit profiles of all operators are subject to the event risk of 3G (third generation) and broadband wireless access (BWA) auctions.

A negative outlook means that the agency may downgrade the ratings of those mentioned in the near future. Fitch also said the credit outlook for incumbents with stronger balance sheets and comfortable liquidity profiles as stable.

Fitch notes that wireless pricing turned aggressive from September 2009, with the major operators reducing tariffs or switching to per-second billing from the previous per minute format.

"Competitive pressures are expected to continue in 2010, consequently, Fitch expects revenue growth to decelerate in CY2010, which in turn will put pressure on EBITDA (profits before taxes, etc) margins," it said.

However, average revenue per minute will decline at a lower rate in 2010, after declining at a faster than expected rate in 2009.