The telecom sector may reverse the revenue declining trend seen over the last two years by recording 7 percent growth this financial year, according to a Crisil report.
The market research and credit rating agency says stable tariff and the new minimum recharge plans will lead to higher subscriber spends.
The market research and credit rating agency also expects network capital expenditure for the top-three telecom operators to moderate to Rs 84,000-90,000 crore in 2019-20, compared with Rs 1 lakh crore in 2018-19.
“The Indian telecom industry will reverse a two-year declining trend with a 7 percent revenue growth in the current financial year. The turnaround will ride on an increase in average revenue per user by 11 percent though the overall subscriber base is expected to shrink by 4 percent.”
According to telecom regulator TRAI’s latest data, gross revenue and adjusted gross revenue of the telecom service providers have been on the decline, barring few exceptions, after it peaked to Rs 73,344.66 crore and Rs 53,383.55 crore in the April-June 2016 quarter with average revenue per user at Rs 140.88.
Gross and average gross revenue of the telecom sector declined by 3.43 percent to Rs 58,991 crore and 6.44 percent to Rs 36,054 crore, respectively, in the three-month period ended December 2018.
The S&P Global-owned company estimates that the industry has lost around 20 percent of potential revenue which is equivalent to around Rs 40,000 crore.
“Pricing aggression is expected to remain moderate and selective in fiscal 2020, given the new entrant has revenue market share leadership in more than 50 percent.
Gandhi said price logs maintained by Crisil Research indicate that the prices of prepaid plans of leading telecom companies have in the past six quarters converged at around Rs 4 per gigabyte and have stabilised in the past two quarters.
After the launch of minimum recharge plans, telecom players have been weeding out low-paying subscribers aggressively, Crisil said in the statement.
The debt of the company is also likely to come down to Rs 3.1 lakh crore during the ongoing fiscal with improvement in profitability and decline in capex.
In the three years through fiscal 2019, weak cash accruals and high capex had pushed up the debt of the top-three telecom operators to Rs 3.6 lakh crore from Rs 2.6 lakh crore, Crisil said.
“Debt protection metrics are expected to improve, with the interest coverage and debt-to-Ebitda ratios touching 2.5 times and 5.6 times by March 2020, compared with an estimated 2 times and 7.7 times, respectively, as of March 2019,” Crisil Ratings Director Nitesh Jain said.
Jain added that despite the improvement, standalone debt metrics will remain weak and overall credit profile will continue to be supported by deleveraging plans and sponsors’ support.―Bloomberg Quint