BUSINESS
Intense competition and pricing pressure will continue to take a toll on the telecom sector with industry revenue expected to plunge by 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 plunge by another 6 per cent during the current financial year, according to ICRA.
"Industry headwinds are expected to continue in FY2018, as competition would remain intense. Industry revenue are expected to decline by six per cent to Rs 2.4 lakh crore in FY2018," ICRA said in its presentation.
It warned that the decline could be sharper for smaller operators like Tata Teleservices, Aircel and Reliance Communications.
Painting a grim picture for the debt-ridden industry and flagging it as a potential "risk", ICRA said that the roll out of GST will further add to 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 is likely to rise to Rs 4.8 lakh crore by March 31, 2018, from Rs 4.6 lakh crore in the previous year, it cautioned. 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.
While spectrum related debt has risen to Rs 1.8 lakh crore, non-spectrum debt has largely remained stable at Rs 2.8 lakh crore for FY2017 including Rs 1.1 lakh crore of bank debt.
For FY2018, non-spectrum debt is expected to be at Rs 3.1 lakh crore while the spectrum debt is seen to be around Rs 1.7 lakh crore.
Repayment burden for spectrum debt is likely to be Rs 25,300 crore per annum for the next two years and Rs 31,700 crore post that, it said.
ICRA views come at a time when the industry is facing a financial crisis, and revenue and profitability of telecom operators have come under pressure following the entry of aggressive newcomer Reliance Jio.
"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.
The report pointed out that heightened competitive intensity and pricing pressures had resulted in the telecom industry s revenue declining by an estimated five per cent to Rs 2.56 lakh crore during FY2017.
"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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