India's telecom industry is all set to record a higher average revenue per user (ARPU) figure in the coming years. This will be the result of increased tariffs which the telcos may introduce in the FY2021-22. According to ICRA, the shift of users from 2G/3G to 4G across the country in the coming years along with the tariff hikes (expected in the next two quarters) will help the industry record an ARPU figure of Rs 220 in the medium-term. It will further improve the industry revenue by about 11% to 13% in the coming two years — more details on the story ahead.
Improved Cashflow Expected for the Industry
According to an investment information firm ICRA, cash flow for the telecom industry should improve in the upcoming financial year. Adding to this, the industry's moderation in capex intensity will reduce the need for more external borrowings for operations.
However, the adjusted gross revenue (AGR) dues will act as a dampener against the improved cash flow. ICRA believes that the industry's total debt will remain elevated at Rs 4.7 lakh crores at the end of FY2021-22 (March 31, 2022). But the improvement in operating metrics will result in the expansion of debt coverage indicators for the industry.
As per ICRA, the interest coverage is expected to get better and go to 2.5x for the upcoming financial year. Further, the total debt/OPBDITA (operating profit before depreciation, interest and taxes) is expected to come down to 4.6x from 7.6x for the same period.
ICRA believes that most of the revenues for the industry will come from non-telecom services. It would include enterprise businesses, digital, cloud, and fixed broadband services.
5G is also expected to add to the growth of the industry. However, a fast-upgradation and pan-India rollout of 5G will take a long time given the precarious balance sheets of the telcos and huge debt on the industry.