Stabilisation of the Indian Telecom Industry is a Few Quarters Away: ICRA

The Indian telecom industry is currently witnessing intense competition and pricing pressures. Since the entry of Reliance Jio back in September 2016, incumbent telcos are facing financial stress and in recent times, the sector is all about mergers and consolidations. According to an ICRA note, stabilisation of the Indian telecom industry is a few quarters away as the merged Vodafone and Idea stabilise, and the subscriber base of the exiting operators diminishes, the competitive intensity is expected to moderate. ICRA believes that by early next fiscal, the industry is likely to witness better outlook driven by improvement in pricing levels. It’s also said that over the longer term, recovery in the sector would hinge on the back of a consolidated structure, better pricing power and sustained data usage. Meanwhile, the debt levels of the industry, which remain elevated as on March 2018, are expected to witness some reduction by way of asset monetisation and promoter funding.

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Mr Harsh Jagnani, Sector Head & Vice President – Corporate Ratings, ICRA said, “Consolidation transactions over the last two-three quarters released a sizeable subscriber base which provided opportunities to larger telcos to enhance their subscriber market share, thus keeping the competitive intensity high. From March 2017 to March 2018, the larger telcos together added 202 million active subscribers and a large portion of this – 192 million came at the expense of discontinuing telcos. Now the subscriber base of the discontinuing telcos has largely diminished.”

“But the impending merger of Vodafone and Idea, and the ensuing integration of the two may see some erosion of subscribers, giving an opportunity to other operators. Thus, we expect that a stable industry structure, with three operators holding more than 90% of the market share, to coincide with the stabilisation of Vodafone-Idea merger. Till such time, the pricing levels in the industry are unlikely to witness material improvement,” he further added.