BANGALORE, INDIA: Fitch Ratings has today said, in a just published Special Report, that the Outlook for the Indian telecoms sector for 2010 is stable to negative.

Fitch views the credit outlook for incumbents with stronger balance sheets and comfortable liquidity profiles as stable, while its outlook for new entrants and public sector telecoms operators is negative.

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

Wireless services are likely to remain the principle driver of industry growth, with penetration still moderate at 43.2 per cent at end-November 2009.

Fitch expects this strong subscriber growth to be sustained at a compound annual growth rate (CAGR) of about 25 per cent -30 per cent over the next three years to CYE12, due to network roll-out by new operators and expansion by regional operators across different Indian circles.

However the agency notes that wireless pricing turned aggressive from September 2009, with the major operators reducing tariffs and/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 margins. However, average revenue per minute will decline at a lower rate in 2010, after declining at a faster than expected rate in 2009. 

(For more news on Reuters Money visit http://www.reutersmoney.in)