Operators unaffected by 4G auctions

A lack of competition for 4G licenses is benefitting European telcos by keeping prices at levels most should be able to cope with, Moody’s Investors Service claims.
The finance firm believes most major operators are unlikely to see any change to their credit ratings as a result of bidding for next-generation spectrum, estimating that the majority will pay €1.5 billion each for licenses in the region’s major markets.
“It appears that the companies are paying reasonable prices and that no new competitors are bidding, which implies that competition is not intensifying,” Carlos Winzer, a senior vice president of Moody’s corporate finance division notes.
Moody’s predicts incumbent carrier’s debt-funding levels will fall “well below 5% of their existing gross debt,” Winzer says, adding that the financing method “on its own, should not affect the companies’ current ratings.”
The firm’s confidence comes despite recent auctions netting more than expected. In France, the first round sale of 2.6GHz spectrum netted the country €936 million – roughly 33% above the reserve price -, while Italy’s sale raised €3.95 billion – some €850 million higher than expected.
However, ratings are unlikely to be affected in the majority of cases because Moody’s counts the investments as one-off items, rather than part of operator’s capital expenditure.