Recovery of the Indian Telecom Industry is Still Far Away: ICRA

Indian Telecom Industry, as everyone might be aware of is currently in a critical position with small players looking out for consolidation with bigger players. ICRA today expressed its opinion that the revival of the Indian Telecom industry is likely to be prolonged and the pressure on the cash flows of the industry may continue for a few more quarters. ICRA today released a note highlighting that due to the price competition which has exerted significant pressures on the Indian telecom industry in FY2018 will remain intense as the larger operators are contesting to acquire subscribers of the small operators leaving the industry telcos. However, the firm predicts that over longer-term recovery is expected in the sector on the “back of a consolidated structure, better pricing power and data usage with greater price-inelasticity.”

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Predicting the future of Indian Telecom Industry, ICRA stated that the industry is likely to witness better outlook driven by improvement in pricing levels in FY2019. Furthermore, the debt levels of the industry, which would remain elevated as on March 2018 are expected to witness some reduction by way of promoter funding and asset monetisation.

Mr Harsh Jagnani, Sector Head & Vice President – Corporate Ratings, ICRA said “The exit of smaller telcos has provided an opportunity for larger telcos to garner subscribers and the competition for them remains intense. We expect the migration of subscribers from the exiting telcos to the continuing telcos to complete over the next six months. But until such time, the pricing levels in the industry are unlikely to witness material improvement. This can be witnessed from the fact that the trend of steady increase in Average Revenue per SIM (ARPS), led by RJio’s plans, witnessed till December 2017 has since been reversed due to discounted price offerings.”