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Ushering in the New Financial Year!

As we usher in the new financial year, corporate sentiments are high. The disruption caused by demonetization and introduction of GST is behind us, infrastructure projects are being implemented, rural economy is looking upward, the World Bank has forecast India’s GDP growth at 7.3 percent in 2018–2019, and gains are expected from a global economy showing promise.

With the Vodafone–Idea merger to be completed by June, India has finally consolidated to three private service providers. CLSA expects that by 2020 the revenue market shares of Jio, Vodafone–Idea combine, and Bharti Airtel each will be in the 30 percent vicinity.

National Telecom Policy 2018 will be unveiled soon. Like its predecessors, this policy too must encourage investment and ensure financial stability of the sector. The industry, in a downward spiral, with cumulative debts amounting to Rs. 4.6 lakh crore on revenues under Rs. 1.8 lakh crore, is questioning the financial viability of the sector. It needs support from the powers-that-be. These include reduction of spectrum usage charge to a uniform 1 percent of AGR, a Telecom Finance Corporation and rationalization of the USO fund contribution to 3 percent for now, operational changes as a single unified license across the country, a spectrum management policy in place so that the major points of conflict are dealt with conclusively, and access to satellite spectrum for any application.

As we move into FY19, financial analysts expect EBITDA margins of mobile service providers to remain subdued as interconnect usage charges could be reduced further in line with the government’s decision to move to zero interconnect usage charges by 2020. FY19 may not witness active participation in spectrum auctions. CapEx will be toward network augmentation, technology investments, and innovative offerings to capitalize on the rising trend of convergence of telecom and media in line with developed markets. Asset monetization may continue in FY19, which could help deleverage the balance sheets. However, valuations of assets available for monetization could be subdued.

The year may well close with 80 percent of the country having 4G, poised for the rollout of 5G in FY20.

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