New Delhi, Nov 23 (TIWN) The decision by all three private Indian telecommunication companies to raise tariffs from December 2019 and a two-year moratorium on payment of spectrum dues are positive for the industry, Fitch Ratings said.

However, these are unlikely to be sufficient to offset the impact of a recent Supreme Court judgement for incumbents Bharti Airtel (BBB-/Rating Watch Negative) and Vodafone Idea Ltd. 

The Supreme Court ruled against the telcos in a 14-year-old dispute on the definition of adjusted gross revenue (AGR) on which the incumbent operators must pay hefty dues to the government. Reliance Jio (Jio), a subsidiary of Reliance Industries Ltd (RIL, BBB-/Stable) is not affected by the ruling and is likely to continue to gain revenue market share, which will support RIL's deleveraging plans. 

Fitch has a negative outlook on the sector for 2020 primarily due to heightened financial risk associated with the large unpaid AGR-related dues. On November 20, 2019, the government announced plans to suspend payment of deferred spectrum dues for two years, which will ease cash flow pressure on all three telcos. 

Vodafone Idea and Bharti will benefit the most as their negative free cash flow will reduce by $1.7 billion and $850 million a year, respectively, for the financial year ending March 2021 (FY21) and FY22. The incumbents are likely to file a review petition in the Supreme Court and have also approached the government to seek other forms of relief including waiver or grant of deferred payment terms for the AGR dues and a reduction of licence fees and spectrum usage charges.