Telekom Austria may have to risk its credit rating, which it said earlier this year was its top priority, to raise debt for a costly frequency auction, its chief executive said.
The company said late on Monday it would pay 1.03 billion euros ($1.41 billion) to buy half the spectrum on offer in an auction for Austrian fourth-generation frequencies, almost three times as much as most analysts had expected.
The auction was the most expensive per head of population in Europe so far for the new frequencies that operators must buy to offer higher speeds and maintain market share, provoking complaints from the three carriers in the country of 8.4 million.
"It is of course a huge burden for the industry. It's a development that we see as very negative," Telekom Austria's (Vienna, Austria) CEO Hannes Ametsreiter told journalists on Tuesday.
Telekom Austria shares fell 6.3 percent to 5.89 euros by 1023 GMT, compared with a European telecoms index that fell 0.7 percent. Deutsche Telekom (Bonn, Germany), whose T-Mobile Austria spent 654 million euros in the auction, fell 1 percent.
Asked on Tuesday about Telekom Austria's goal of maintaining its BBB (stable) rating, Hannes Ametsreiter said: "Naturally, that is now to be seen in a different light and to be discussed with the ratings agencies."
He ruled out a capital increase in the short term to finance the auction, but declined to comment on whether such a move might be an option to refinance the debt the company said it would raise to pay for the frequencies along with existing cash.
Telekom Austria had cash, cash equivalents and short-term investments of 958 million euros at the end of June.
Deutsche Bank, Morgan Stanley and Berenberg Bank all cut their price targets on Telekom Austria, and Macquarie wrote in a note: "We think a downgrade to junk is possible given the size of the auction cost."
Ametsreiter said Telekom Austria would stick to its 2013 investment goals of about 400 million euros for Austria and 650-700 million for the group, and saw no significant increase in group capital expenditure next year.
(Reporting by Georgina Prodhan, Editing by Patrick Lannin)