CRISIL believes the Indian telecom industry will reverse a two-year declining trend with a 7% revenue growth in fiscal 2020. The turnaround will ride on an increase in average revenue per user (ARPU) by 11%, though the overall
\nsubscriber base is expected to shrink by 4%.<\/p>\n
\nA protracted tariff war has pushed ARPU to a decadal low. This is despite the consolidation in the industry that has
\nreduced the number of major players to three, in line with global standards. In the past two years, the industry has
\nlost ~20% of potential revenue, tantamount to over Rs 40,000 crore.<\/p>\n
\nCRISIL, however, believes telecom tariffs have bottomed out. This reflected stable pricing and the fact that the top
\nthree telecom companies (telcos) now have almost equal revenue market share, price-led aggression could
\nimpact all adversely. Additionally, higher data usage and introduction of minimum recharge plans led to growth in ARPU.<\/p>\n
\nHetal Gandhi, Director, CRISIL Research says, \u201cPricing 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 maintained by CRISIL Research indicate the prices of prepaid plans of leading telcos have over the past six quarters converged at ~Rs 4 per GB and have stabilised over the last two quarters.\u201d<\/p>\n
\nAs for the subscriber base, the rural markets continue to add subscribers, given low tele-density. In the saturated
\nurban markets, however, consolidation of dual-SIM into single-SIM subscribers will reduce the subscriber base.
\nIndeed, after the launch of minimum recharge plans, telcos have been weeding out low-paying subscribers
\naggressively.<\/p>\n
\nProfitability of the telcos is expected to look up, with the earnings before interest, taxes, depreciation and amortisation (EBITDA) margins improving ~350 basis points on-year to 31% in fiscal 2020. The combined EBITDA of the top three players is expected to improve to Rs 56,200 crore from Rs 46,100 crore a year ago \u2013 a sharp jump of\u00a0 over 20%.<\/p>\n
\nCapital expenditure (capex) has been high in the sector, and has accentuated as incumbents (Bharti Airtel and
\nVodafone-Idea) increased capex to counter 4G threat from the new entrant (Reliance Jio) in the last two years.
\nHowever, network capex for the top three telcos is expected to moderate to Rs 84,000-90,000 crore in fiscal 2020,
\ncompared with Rs 1 lakh crore in fiscal 2019.<\/p>\n
\nThe improvement in profitability and decline in capex, together with sizeable deleveraging plans, will support a
\nreduction in debt to Rs 3.1 lakh crore, by March 2020. In the three years through fiscal 2019, weak cash accruals
\nand high capex had pushed up the debt of the top three telcos to Rs 3.6 lakh crore from Rs 2.6 lakh crore.
\nAll the same, deleveraging efforts and support from sponsors have been supporting credit quality. The top three
\ntelcos raised almost Rs 1.5 lakh crore through equity infusion and asset sale in the three years through fiscal 2019
\nand are expected to raise a further Rs 75,000-80,000 crore in fiscal 2020.<\/p>\n
\nNitesh Jain, Director, CRISIL Ratings says, \u201cDebt protection metrics are expected to improve, with the
\ninterest coverage and debt-to-EBITDA ratios touching 2.5 times and 5.6 times by March 2020, compared with
\nan estimated 2 times and 7.7 times, respectively, as of March 2019. Despite the improvement, standalone
\ndebt metrics will remain weak. Overall credit profile will continue to be supported by deleveraging plans and
\nsponsors\u2019 support.\u201d<\/p>\n
\nCapex plans pertaining to 5G services and wired-broadband will be key monitorables in the near to medium term.<\/p>\n","protected":false},"excerpt":{"rendered":"
CRISIL believes the Indian telecom industry will reverse a two-year declining trend with a 7% revenue growth in fiscal 2020. The turnaround will ride on an increase in average revenue per user (ARPU) by 11%, though the overall subscriber base is expected to shrink by 4%. A protracted tariff war has pushed ARPU to a […]<\/p>\n","protected":false},"author":1,"featured_media":2431,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[739,655,3737],"class_list":["post-4796","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy-and-politics","tag-crisil","tag-ebitda","tag-telecom-sector"],"aioseo_notices":[],"yoast_head":"\n