AGR Liabilities And Latest Spectrum Auction Might Affect Telecom Sector

The upgradation of users from 2G to 4G and mobile data usage is likely to increase the ARPU of the telecom operators, which will help the industry to increase revenue. The telecom industry is likely to increase its average revenue per user by Rs. 220 as per credit rating agency ICRA.

According to ICRA, the telecom operators have managed to improve their conditions, and the next phase of growth is likely to come from other businesses, such as enterprises, digital services, internet services, and cloud services.

"We expect the industry revenues to grow by 11-13 percent per annum over the next two years, which given the high operating leverage, is likely to result in expansion in operating margins," Sabyasachi Majumdar, senior vice president (Corporate Ratings) at ICRA said.

However, the rating agency said that the adjusted gross revenue (AGR) dues and latest spectrum auction might affect the sector and cash flow in the sector.

Spectrum Sale In India

The firm said that the debt of the industry is expected to increase by March 31, 2022. The firm states that Reliance Jio spent 57,123 crores in the auction, while Airtel spent Rs. 18,699 crores and Vi paid Rs. 1,993 crores. ICRA also highlighted that telcos have already paid Rs, 22,000 crores to the Government. Apart from that, ICRA added that Reliance Jio signed a spectrum trading agreement with Airtel for the 800 MHz.

"While some improvement is expected in the debt coverage indicators following the improvement in operating metrics, they continue to remain weak with industry debt/OPBDITA of more than 5x for FY2022," Sabyasachi Majumdar added.

Q3 F21 Average Revenue Per User Of Reliance Jio, Airtel, and Vodafone-Idea

Reliance Jio managed to increase its ARPU to Rs. 151 from Rs. 145 in Q2 FY21, whereas India's second-largest telecom operator Airtel increased ARPU to Rs. 166 from Rs. 162, and Vi managed to increase its ARPU to R. 121 from Rs. 109. It is worth mentioning that both Reliance Jio and Airtel are expected to increase their subscriber base, average revenue per user, and post a profit in the coming results (Q4 FY21).