Telecom Sector Might Face Rs. 4.7 Lakh Crore Debt By 2022

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Although telecom operators have to pay AGR debt, it is expected that the sector is likely to witness another financial crisis by 2022 as per the domestic rating agency ICRA. This development comes at a time when Airtel and Vi have to pay 10 percent of the adjusted gross revenue debt by the end of March 2021.

 
Telecom Sector Might Face Rs. 4.7 Lakh Crore Debt By 2022

"Although sizeable deleveraging was done in FY2020, which along with moderation in Capex intensity has resulted in a decline in debt to Rs. 4.4 lakh crore as on March 31, 2020; and though improvement in cash flow generation is anticipated, the debt levels are expected to increase further to Rs. 4.7 lakh crore as on March 31, 2022," ICRA said in a report.

In fact, the report predicted that tariff increase is likely to increase revenue until 2022. The report also said that the average revenue per user will be Rs. 220 in the next two years. For the unaware, ARPU is an important measure to check the performance of telecom operators. It is important for telecom operators as it contributes to their revenue. Furthermore, the report pointed out that the hikes and up-gradation of users from 2G to 4G are likely to improve the average revenue per user.

"Tariff hikes and up-gradation of subscribers from 2G to 4G is expected to result in improvement in ARPU to around Rs. 220 in the medium term. ICRA expects the industry revenue to grow by 11-13 percent over the next two years, with operating margins improving to around 38 percent for FY2022," Anupama Arora, Vice President and Sector Head, Corporate Ratings, ICRA said. Meanwhile, the Department of Telecommunication is all set to conduct a spectrum auction in March 2021, which is likely to garner between Rs. 30,000 crore to Rs. 50,00 crore as per industry analysts.

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