Financial Position of the Indian Telecom Industry Would Remain Subdued in the Coming Quarters: ICRA

Over the last few months, the Indian telecom industry has witnessed several events such as consolidation and continued uptick in pricing by Reliance Jio, which indicate that the telecom industry is entering a stable phase after a while. This follows a long period of evolution with swift changes in contours of the industry.

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“The last one year has been especially turbulent for the industry with severe competition denting its financial health, forcing some of the players to exit or merge. The emerging oligopolistic industry structure, assuming that the pending merger plans go through, is likely to be more promising – with leaner structure, better pricing power, and steady data demand. However, in the short run, the operators are likely to compete intensely to garner market share. The financial position of the industry would remain subdued in the coming quarters, reflecting issues around pricing pressure, the decline in Interconnect Usage Charges and elevated debt levels,” Mr Harsh Jagnani, Sector Head & Vice President – Corporate Ratings, ICRA said.

Reflecting the transition over the years – the gross ARPS (Average Revenue per SIM) for the industry increased from Rs. 113 in Q1FY2014 to Rs. 128 in Q1FY2016 before declining sharply to Rs. 83 in Q1FY2018. The AGR (Aggregate Gross Revenue) of the industry mirrored this trend – increased from Rs. 30,500 crore to Rs. 38,600 crore and then declining to Rs. 30,100 crore over the same periods.

Also, pressure on operating and financial metrics, coupled with elevated debt levels, which is estimated at Rs. 4.6 lakh crore as of March 2017 – and constant need for capital expenditure for network and spectrum triggered consolidation in the industry (both exits as well as mergers).