BETTER TIMES: These come off a lower base and will still be significantly lower than the peak of fiscal 2016, Icra says
The telecom industry may see a modest price increase in the fiscal 2020, which can improve their revenues and profits.
In the last few months, there have been some signs of stabilisation in average revenue per user (Arpu), according to a report by ratings agency Icra.
Arpu is a key matrix to show profitability for telecom players.
"We expect minor improvements with revenues estimated to grow by 6% and Ebitda by 20% in fiscal 2020. However, these come off a lower base and will still be significantly lower than the peak of fiscal 2016," Harsh Jagnani, sector head & vice-president, corporate ratings, Icra, said.
As the telecom industry continues to witness intense competition and limited pricing power, fiscal 2019 would be the third consecutive year of revenue decline, the report said.
Industry revenues declined 11% in fiscal 2018 to Rs 2.1 lakh crore, and are expected to fall further 7% in fiscal 2019. The industry Ebitda is estimated to reduce by 18% in fiscal 2019, following a 21% erosion in fiscal 2018 (Rs 49,000 crore).
However, based on third quarter trends, the decline in Arpu has been arrested and the incumbent operators are looking for triggers of upward movement, with some implementing minimum recharge plans, Jagnani said.
The entry of a new player Reliance Jio in late 2016 changed the dynamics of the telecom industry. Jio brought in intense price-based competition, which is still continuing.
It (severe competition) has resulted severe deterioration in the financial performance, marked by a decline in revenues, lower profitability (even losses for some talks) and low cash generation, Icra said.
The higher data usage could result in more consolidated and stable industry structure with some pricing discipline in fiscal 2020.
As of now, there is a limited visibility of the industry achieving the peak revenues seen in fiscal 2016. The subscriber base of the industry has not seen significant growth over the last two years. It stood at 117 crore as of December 2018, and a moderate addition is expected, going forward.
The pressures on the industry has led to a reduction in non-tax revenues of the government, with lower license fee (LF) and spectrum usage charges (SUC). These two-combined declined by 24% in fiscal 2018 and are expected to decline further in fiscal 2019. Further, the exits by some operators may result in a sizeable quantum of spectrum, around 551 MHz across bands, to be repatriated back to the government. Icra expects fiscal 2019 and fiscal 2020 non-tax revenues from the sector to be in the range of Rs 35,000-40,000 crore per year. The proportion of overall receipts to the total non-tax receipts is expected to be the lowest in the last six years. Return of the auctioned spectrum by exiting telecom firms can result in Rs 1,100 crore per year reduction in deferred spectrum payouts to the government, the report said.
FEEBLE RING
- Industry revenues declined 11% in fiscal 2018 to Rs 2.1 lakh crore, and are expected to fall further 7% in fiscal 2019
- The industry Ebitda is estimated to reduce by 18% in fiscal 2019, following a 21% erosion in fiscal 2018
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Telecom sector")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}