Intense competition and pricing pressure will continue to take a toll on the telecom sector with industry revenue expected to fall another 6 per cent during the current financial year, according to ICRA.
Intense competition and pricing pressure will continue to take a toll on the telecom sector with industry revenue expected to fall another 6 per cent during the current financial year, according to ICRA.
Presenting the grim picture for the debt-ridden industry and flagging potential "risk", ICRA said that the roll out of GST will further compound the woes for telcos as the higher tax incidence would have to be absorbed by them leading to some additional pressure on cash flows.
The industry debt likely to rise to Rs 4.8 lakh crore by March 31, 2018, against Rs 4.6 lakh crore in the previous year, it warned. The pressure on cash flows on the one hand and the need for constant capex on the other, pose a challenge towards debt servicing, it noted.
"The impact on the telecom industry s financial health was visible in the second half of FY2017 post RJio s launch.
ICRA estimates the situation to remain weak during this fiscal as well, as the pricing pressures show no signs of abatement," it said.
ICRA pointed out that heightened competitive intensity and pricing pressures had resulted in the telecom industry s revenue and EBIDTA declining by an estimated 5 per cent and 10 per cent respectively during FY2017.
"ICRA estimates the FY2018 revenue and EBITDA to decline by 6 per cent and 28 per cent respectively. The EBITDA for FY2018 is estimated at Rs. 46,000 crore, translating into modest operating margins of 20 per cent, which, in light of the sizeable debt levels presents a high credit risk," Harsh Jagnani, Sector Head and Vice President Corporate Ratings, ICRA said.
(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)
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