The increase in telecom rates along with the recent bailout package provides ample room for the industry to undertake deleveraging and fund capex for 5G tech upgrades, rating agency ICRA said on Wednesday that the outlook for the telecom services sector was revised from ‘stable’ to ‘negative’. ‘.
The increase coupled with a consistent upgrade of subscribers to 4G from 2G and an increase in the use of telephony services is expected to lead to an improvement in the industry ARPU (average revenue per user) to about Rs 170 by the end of 2022 -23, it said.
The telecom sector has implemented the highly anticipated rate hikes that have the potential to improve the sector’s ARPU levels to around Rs 170 by the end of 2022-23, ICRA said.
“This will result in higher earnings generation, which, combined with the aid package announced by the government, provides ample room for the industry to undertake deleveraging and fund capex (capital expenditure) for the technology upgrade to 5G,” the agency said.
Sabyasachi Majumdar, senior vice president and group head (corporate assessments) of ICRA Limited, said the latest round of rate hikes, with telecoms raising prepaid rates by about 20 percent, will provide much-needed traction to ARPU levels.
“We expect the sector’s revenues to grow 18-20 percent in 2022-23, followed by 10-12 percent growth in 2023-24, which, given the high operating leverage, is likely to translate into healthy growth. business expansion. Profits are expected to grow approximately 30 percent in 2022-23,” the report said.
“While the moratorium on dues would affect the government’s non-tax revenues from the telecom sector, two telcos have prepaid their dues for previous spectrum auctions totaling Rs 26,300 crore, making up for the loss to the government,” ICRA added.
For 2021-22, the telecom sector is expected to contribute about Rs 54,000 crore to the government’s non-tax revenues, which will be close to the forecast estimate for the fiscal year.
However, debt remains the industry’s “Achilles heel,” it warned.
ICRA expects the sector’s debt levels to remain around Rs 4.7 lakh crore on March 31, 2022, before moderating to Rs 4.5 lakh crore on March 31, 2023.
“Telcos have focused on reducing leverage and Bharti Airtel has recently completed its rights issue of Rs 21,000 crore and collected 25 percent as a prepayment, while Vodafone Idea is also seeking a fundraiser,” ICRA said in a statement.