NEW DELHI: The Jio-induced pains for Indian telecom sector is likely to fade away in FY20, albeit modestly, by way of a pricing increase, which in turn is slated to trigger some growth in sectoral revenue after three successive years of decline, says ratings agency ICRA.
The intense competition after the launch of Jio has continued and the pricing pressure has manifested in “severe deterioration in the financial performance, marked by a decline in revenues, lower profitability (even losses for some telcos) and low cash generation,” ICRA said.
Trends of December quarter, however, signal that some recovery is in the offing with telco ARPUs (average revenue per user) showing “signs of stabilisation” and incumbent operators Bharti Airtel and Vodafone Idea looking for triggers of upward movement by implementing minimum recharge plans. Telcos will further be bolstered by planned deleveraging initiatives to the tune of Rs 1 lakh crore.
The telecom industry revenues, which declined by 11 per cent to Rs 2.1 lakh crore in FY18, are estimated to further decline by 7 per cent in FY19. “...but we expect minor improvements with (industry) revenues estimated to grow by six per cent year-on-year and operating income or ‘Ebitda’ by 20 per cent in FY20, driven by benefits of higher data usage, and a relatively more consolidated and stabler industry structure, resulting in some pricing discipline,” said Harsh Jagnani, sector head & VP, Corporate Ratings, ICRA. He, however, added that the envisaged sectoral revenue recovery in FY20 would still be significantly lower than the peak in FY16.
From a profitability perspective, he said, the operating profit decline is expected to narrow to 18 per cent in FY19 from 21 per cent decline last year. The same is likely to go up by 20 per cent in FY20, he said.
Jagnani also pointed out that the sustained stress in the sector will impact the government as non-tax revenues earned by it in terms of licence fee and spectrum usage charges will go down.