telecom news: Debt for telecom industry to rise despite price hikes: ICRA


Despite restoration in the pricing power back to the telcos and the next round of tariff hikes being on the cards, debt levels of the industry are expected to rise to Rs 4.7 lakh crore by March 2022, according to estimates by ratings firm ICRA.

“Debt continues to remain the Achilles’ heel of the industry. Although sizeable deleveraging was done in FY2020, which along with moderation in capex intensity has resulted in a decline in debt to Rs. 4.4 lakh crore as on March 31, 2020; and though improvement in cash flow generation is anticipated, the debt levels are expected to increase further to Rs. 4.7 lakh crore as on March 31, 2022,” ICRA said in a report on Monday.

This is because of the accumulation of AGR liabilities in debt, in addition to the proposed spectrum auctions, it said.

According to data released by the telecom regulator, the industry revenues in the first of FY21 has grown 25% on-year, while average revenue per user (ARPU) has increased from Rs 74 to Rs 90.

ICRA expects the telecom service providers (telcos) to dial in the next round of tariff hikes over the next one or two quarters, which is likely to drive revenue growth in FY2022.

“Tariff hikes and upgradation of subscribers from 2G to 4G is expected to result in improvement in ARPU to around Rs. 220 in the medium term. ICRA expects the industry revenue to grow by 11-13% over the next two years, with operating margins improving to around 38% for FY2022,” said Anupama Arora, Vice President and Sector Head, Corporate Ratings, ICRA.

“The sector is moving towards the inflection point, wherein the next phase of growth will be driven by the non-telco businesses, which include – enterprise business, cloud services, digital services and fixed broadband services. Further, in terms of the core business, 5G, which is knocking on our doors, would be the growth driver,” said Ankit Jain, Assistant Vice President, ICRA.

He, though pointed at factors such as limited paying capacity of the Indian consumer, coupled with the precarious position of the balance sheets of telcos could be a dampener to 5G upgradation.

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