Telecom sector debt to remain elevated: ICRA

Credit rating agency ICRA Tuesday said that telecom industry’s debt would remain elevated and maintains negative outlook for the sector with no respite in sight, following intense rivalry.

“The industry debt remains elevated owing to reduction in organic cash flow generation and consistently high capex requirements,” the Delhi-based firm in a statement said, adding that the recent rupee deprecation has added to the debt levels.

The industry debt as on March 31, 2018 stood at Rs. 4.7 lakh crore, ICRA estimated.
The recent rupee depreciation and increase in diesel prices would hurt the industry further, it added.

However, for FY2019, ICRA expects the industry debt levels to reduce to Rs. 4.2 lakh crore, with monetisation of tower assets and promoter support being the major drivers.

The telecom industry woes, it said, is expected to persist amid intense competition and pricing pressures with a recovery, backed by restoration of pricing power with the telcos, is still not in sight.

Billionaire Mukesh Ambani-owned Reliance Jio’s disruptive foray in September 2016 led the price war among incumbents which continue to lose revenue on a quarterly basis, and triggered market consolidation.

The recovery, which was anticipated on the back of a consolidated industry structure and data usage with greater price-inelasticity, has been prolonged, the statement added.

Consistent downward revision in prices, according to ICRA, has resulted in one of the steepest falls in the industry average revenue per user (ARPU) levels with the estimated blended ARPU falling from Rs 169 in Q1 FY2017 to Rs 116 in Q1 FY2019 – with the industry adjusted gross revenue (AGR) falling from Rs. 44,570 crore to Rs. 25,580 crore in the same period.

The industry has been going through a phase of turbulence during the last few years, with intense competition and pricing pressures leading to a decline in revenues and profitability.