Along with an improvement in profitability, decline in capex and sizeable deleveraging plans is expected to support a reduction in debt to Rs 3.1 lakh crore by March 2020
Indian telecom sector's revenues are expected to grow 7% in 2019-20, reversing a two-year declining trend, according to a report.
The revenues will increase on the back of an expected increase in average revenue per user (ARPU) by 11%, as various measures by telecom players, including a minimum recharge plan along with high data consumption, will push the ARPU levels higher, ratings agency Crisil said in the report.
Along with an improvement in profitability, decline in capex and sizeable deleveraging plans is expected to support a reduction in debt to Rs 3.1 lakh crore by March 2020.
However, the overall subscriber base is likely to shrink by 4%.
Telecom tariffs have bottomed out as reflected in stable pricing with top three telecom companies now having almost equal revenue market share. However, network capex for the top three telcos is expected to moderate to Rs 84,000-90,000 crore in fiscal 2020, compared with Rs 1 lakh crore in fiscal 2019.
"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% of the 22 circles. Price logs indicate the prices of prepaid plans of leading telcos have over the past six quarters converged at approximately Rs 4 per GB and have stabilised over the last two quarters," Crisil research director Hetal Gandhi said.
The sector has seen capex increasing in the last two years as incumbents Bharti Airtel and Vodafone-Idea had to counter the 4G threat coming in from Jio.
In the last three years through fiscal 2019, weak cash accruals and high capex had pushed the debt of the top three telcos to Rs 3.6 lakh crore from Rs 2.6 lakh crore. During the same period, the top three telcos raised almost Rs 1.5 lakh crore through equity infusion and asset sale and are further expected to raise Rs 75,000-80,000 crore in fiscal 2020. Debt metrics will remain weak despite year-on-year improvement.
Rural markets continue to add subscribers given the low teledensity, while in the saturated urban markets, consolidation of dual-SIM into single-SIM subscribers will reduce the subscriber base, Crisil said.
Since the entry of Reliance Jio in the telecom sector, revenues and profits of telecom firms have nosedived. It also forced consolidation in the sector, where only three private players – Reliance Jio, Airtel, Vodafone Idea are left. On the other hand, the telecom PSUs, BSNL and MTNL, are also struggling to sustain themselves in a highly competitive market.
RECHARGING BACK
- Rs 3.1 lakh crore – Reduced debt of telcos seen by March 2020
- Rs 84,000-90,000 cr – Capex of 3 telcos expected in 2019-20
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