The much awaited spectrum auction, wherein eight companies are bidding to acquire radiowaves in four bands, started on Wednesday.
Fitch said: "The auction is likely to see intense bidding by telcos to retain their existing spectrum and to acquire new spectrum as supply is limited. Telcos are likely to commit at least $13 billion in the auctions."
The government has set a base price of Rs. 82,395 crores for the 2G and 3G spectrum across various frequencies.
Sources in the government have said that it expects bids to top Rs. 1,00,000 crores.
The bids are expected to ease pressure on the rising fiscal deficit, which has already overshot the budget estimate and was at 107 percent as of January.
Over three fourths of the bids will come from the top four operators including Bharti Airtel, Vodafone and Idea Cellular, while Reliance Jio - slated to make pan-India entry this year - will also be bidding, the agency said.
Among the lot, the Aditya Birla Group-promoted Idea may have to bid most aggressively as over 70 percent of its annual revenue is at stake, it said.
"Idea is most exposed in the auctions as it needs to retain its expiring spectrum in circles which contribute around 70 percent of its annual revenue," it said, adding that it is the same for Vodafone and Airtel at 45 percent and 35 percent, respectively.
Each of the three said companies' total bids will be between $2.5 to 4.5 billion, including acquiring spectrum getting expired as well as new spectrum for serving the growing data usage.
Idea's licence in nine circles is expiring, while for Vodafone the number stands at seven and for Bharti, it is six circles where a renewal is required, Fitch said.
Acknowledging that both Bharti and Idea have created a sizeable war-chest for the auctions through equity sale or monetising assets, it said only Bharti will continue to hold on to its rating post-auction.
The least affected among the companies will be Anil Ambani-promoted RCom, which will bid up to $667 million (roughly Rs. 4,141 crores) and will also continue to retain its rating, Fitch said.
The cash flows of the companies will still be manageable post auction as well, Fitch said, noting that they have the option to pay spectrum cost in phases, with one-quarter upfront and the balance over 10 years.
"Most telcos' net debt will rise to fund spectrum payments while competition limits their ability to raise tariffs, particularly with the impending entry of a new competitor, Reliance Jio," it said.
Reliance Jio, which is rolling out its services with an investment of $12 billion (74,508 crores), will bid to fill its spectrum gaps in the 1800MHz band, it said.
Moreover, Reliance Jio "could push up the spectrum price in 900MHz for other telcos, if it chooses to do so, as the auction mechanism hides the identities of participants," the agency noted.
Bidding for the 900MHz band, which can be used for both 2G and 3G, will be the most intense and actual bids would come up to 20 percent higher than the reserve price, it said.
Eight operators are likely to bid for a total of 465MHz of spectrum across four bands - 800MHz, 900MHz, 1800MHz, and 2100MHz - where each band is valid for 20 years, it said.