Indian telecom industry to witness decline in revenue for third consecutive year: ICRA

The telcos have lined up sizeable deleveraging plans, which include equity infusion plans by most operators, stake sales in tower companies as well an IPO in the African unit by Bharti Airtel Limited.

|

The Indian telecom industry continues to witness a decline in revenue for the third consecutive year, the report by domestic rating agency ICRA Ratings said.

Indian telecom industry to witness decline in revenue

 

ICRA said, the launch of services by RJio marked the beginning of the intense price-based competition, which has largely continued.

However, trends of the last few months indicate some recovery with ARPUs showing signs of stabilization. A modest increase in pricing is expected in FY2020, which can reflect in better revenues and profits.

Harsh Jagnani, Sector Head & Vice President, Corporate Ratings, ICRA, says, "The revenues of the industry which declined by 11 percent in FY2018 to Rs. 2.1 lakh crore is estimated to decline further by 7 percent in FY2019. The industry EBITDA is estimated to reduce by 18 percent in FY2019, following a 21 percent erosion in FY2018 (Rs. 49,000 crores)."

"FY2020 can witness the benefits of higher data usage, and a relatively more consolidated and stable industry structure resulting in some pricing discipline. We expect minor improvements with revenues estimated to grow by 6 percent and EBITDA by 20 percent in FY2020. However, these come off a lower base and will still be significantly lower than the peak of FY2016," Jagnani said.

As of now, there is limited visibility of the industry achieving the peak revenues seen in FY2016. The subscriber base of the industry has not seen significant growth over the last two years. It stood at 1176 million as of December 2018 and moderate addition is expected going forward. At such subscriber level, the industry ARPU would have to improve from Rs. 116 (per month) in FY2018 to Rs. 155 for the industry to achieve FY2016 revenues levels (assuming non-mobile revenues remain the same).

The telcos have lined up sizeable deleveraging plans, which include equity infusion plans by most operators, stake sales in tower companies as well an IPO in the African unit by Bharti Airtel Limited. These plans are expected to result in inflows of around Rs. 1 lakh crore which can lead to a reduction in debt to Rs. 4.3 lakh crore as of March 31, 2020.

 

Jagnani said, "Overall, despite the reduction in debt levels and some improvement in operating profits, the coverage indicators would continue to remain weak as reflected by the estimated interest coverage of 1.4x and debt/EBITDA of 8x as on March 31, 2020."

ICRA also pointed out that the pressures on the industry have led to a reduction in non-tax revenues of the Government of India, with lower license fee (LF) and spectrum usage charges (SUC).

These two-combined declined by 24 percent in FY2018 and are expected to decline further in FY2019.

Further, the exits by some operators may result in a sizeable quantum of spectrum, around 551 MHz across bands to be repatriated back to DoT. ICRA expects FY2019 and FY2020 non-tax revenues from the sector to be in the range of Rs. 35,000-Rs. 40,00 crore per year. The proportion of overall receipts to the total non-tax receipts is expected to be the lowest in the last 6 years.

Most Read Articles
Best Mobiles in India

Read More About: telecom icra airtel vodafone

Best Phones

Get Instant News Updates
Enable
x
Notification Settings X
Time Settings
Done
Clear Notification X
Do you want to clear all the notifications from your inbox?
Yes No
Settings X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Gizbot sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Gizbot website. However, you can change your cookie settings at any time. Learn more