ICRA said the recent rupee depreciation and increase in diesel prices would hurt the industry further.
The industry debt remains elevated owing to a reduction in organic cash flow generation and consistently high CapEx requirements. Further, the recent rupee depreciation has added to the debt levels.
As per ICRA estimates, the debt as on March 31, 2018, stood at Rs. 4.7 lakh crore. For FY2019, it expects the industry debt levels to reduce to Rs. 4.2 lakh crore, with the monetization of tower assets and promoter support being the major drivers. Nevertheless, the debt protection metrics will continue to remain weak – estimated debt/EBITDA more than 7.0x as of March 31, 2019.
The firm pointed out that the greater proliferation is expected in the home broadband and Direct-to-Home (DTH) services. While these services have been provided by many telecom players for many years, a new entrant with plans for widespread penetration is likely to provide a greater fillip to these segments.
Another emerging trend is a greater focus on content by the telecom operators to increase customer stickiness. These developments would mean greater convergence of various means of mobility and entertainment, with telecom networks serving as the foundation.
The rate of CapEx has remained high for most operators in the last few quarters and no major let-up is envisaged in the medium term. The industry needs to expand in terms of technology and reach; strong growth in data usage being an important contributor. The capex requirement is coming from network expansion, technology up-gradation, and greater fiberisation which is essential for data-heavy usage.
Going forward as well, the operators would need to invest to develop newer technologies for increasing use-cases of telecom networks and services.
On top of this, the likelihood of spectrum auctions is increasing with the passage of time, as the existing spectrum gets exhausted with usage expansion, and spectrum-intensive use-cases are introduced. Payouts for spectrum would be an additional financial burden for the industry. – Gizbo