Dell_20181213

Dell_20181213

Telecom Outlook For Next Year Bleak: ICRA

The woes of the telecom industry will continue, with no stabilisation in sight amid intense competition and pricing pressures, ratings and research firm Icra has said in its year-end outlook on the sector.

Consistent downward revision in prices has resulted in one of the steepest falls in the industry average revenue per user (ARPU) levels with the estimated blended ARPU falling from Rs 169 in Q1FY17 to Rs 116 in Q1FY19 — with the industry adjusted gross revenue (AGR) falling from Rs 44,570 crore to Rs 25,580 crore in the same period. The overall high operating leverage of the industry means that the decline in revenues has percolated to pressure on profitability and cash flows. Further, the industry is weighed down by high debt levels and capital expenditure (capex) requirements.

The recovery, which was anticipated on the back of a consolidated industry structure and data usage with greater price-inelasticity, has been prolonged, the firm noted.

The industry debt remains elevated owing to 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. However, for FY19, the industry debt level is expected to reduce to Rs 4.2 lakh crore, with monetisation of tower assets and promoter support. Nevertheless, the debt serviceability will continue to remain weak, with debt/Ebitda estimated to be more than 7x as of March 31, 2019.

These factors have resulted in poor return on investments for all the operators. The inherent unsustainability of this for longer period means that both the revenue generation as well as the profitability will have to improve substantially.

Icra highlights that pricing improvement, among others, will be the key drivers for achieving this. However, “the competitive headwinds remain strong with most operators looking for greater entrenchment. Thus, the outlook for pricing restoration remains hazy and not so imminent,” it added.
As for the capex, it has remained high for most operators in last few quarters and no major let-up is envisaged in medium term. “The capex to sales ratio for the telcos has increased significantly — at around 30% against the average of 15-20% seen in the past.

Going forward as well, the operators would need to invest to develop newer technologies for increasing use-cases of telecom networks and services”, it said. Payouts for spectrum would be an additional financial burden for the industry, as the existing spectrum gets exhausted with usage expansion, and spectrum-intensive use-cases are introduced. – Financial Express

Share this:

Related Post

Leave a Reply

Your email address will not be published. Required fields are marked *

Stay Updated on Enterprise Network and Carriers Industry.
Receive our Daily Newsletter.