Telecom tariff hike along with the recent relief package provides enough headroom for the industry to fund capex along with delivering for 5G tech upgrades, rating agency ICRA on Wednesday downgraded the outlook on the telecom services sector from ‘negative’ to ‘negative’. Modified to ‘stable’.
It said that the industry ARPU (average revenue per user) is expected to improve by around Rs 170 by the end of 2022-23, as a result of continuous upgrade of consumers from 2G to 4G and increase in use of telephony services.
According to ICRA, the telecom industry has implemented the long-awaited tariff hike, which has the potential to improve industry ARPU levels to around Rs 170 by the end of 2022-23.
“This will increase profits, which coupled with the relief package announced by the government provides the industry with substantial headroom to fund capex (capital expenditure) while deleveraging for technology up-gradation in 5G,” the agency said. ,
Sabyasachi Majumdar, Senior Vice President and Group Head (Corporate Ratings), ICRA Limited said that the latest round of tariff hikes where telcos have increased prepaid tariffs by around 20 per cent will provide much needed traction in ARPU levels.
“We expect industry revenues to grow by 18-20 per cent in 2022-23, followed by 10-12 per cent in 2023-24, given the high operating leverage, to translate into healthy expansion in operations. Profits are expected to grow by about 30 per cent in 2022-23,” it said.
“While the moratorium on dues will impact the government’s non-tax receipts from the telecom sector, the two telcos have pre-paid their dues for the earlier spectrum auctions, aggregating to Rs 26,300 crore, causing loss to the government. ICRA further added.
For 2021-22, the telecom sector is expected to contribute around Rs 54,000 crore to the government’s non-tax receipts, which will be closer to the budget estimate for the fiscal year, it is estimated.
Debt, however, remains the “Achilles’ heel” of the industry, it warned.
ICRA expects the industry credit level to be around Rs 4.7 lakh crore by March 31, 2022, limited to Rs 4.5 lakh crore as on March 31, 2023.
ICRA said in a statement, “Telecos is focusing on de-leveraging and Bharti Airtel recently liquidated its rights issue of Rs 21,000 crore and collected 25 per cent as advance payment, while Vodafone Idea is also looking for a fundraiser.”