NEW DELHI: Telecom may be among the very few sectors not immediately impacted by the Covid-19 pandemic. But with its already high debt levels expected to grow and recession risks becoming pronounced, the sector’s troubles are only set to linger.
On a positive side, the nationwide lockdown has resulted in a sharp rise in internet usage, especially in the traditionally underpenetrated wired broadband segment. According to an Edelweiss report, the lockdowns are spurring a “paradigm shift” in consumer behaviour. “This is leading to higher dependency on digital tools such as videoconferencing, collaborative applications, etc, driving up demand for telecom services,” Edelweiss says.
CRISIL says wired broadband data usage has surged 25-30 per cent since the lockdown began. The pandemic may well result in an increase in wired connections, a segment that has stagnated at 18-19 million users since the launch of Reliance Jio and the advent of the telecom tariff wars in 2016.
Telecom’s classification as an essential service has also protected it from general revenue disruptions, though telecom operators are expected to take a cumulative revenue hit of Rs 600 crore for the first batch of prepaid validity extensions given to low-income customers. While another extension on validity has been announced, analysts note that the impact is negligible when compared to the sector’s total revenues. According to Edelweiss, the negative impact of Covid-19 is likely to be “peripheral”, limited to SIM consolidation and slower 4G additions as customers cut costs.
Debt set to soar
But, while telecom may have escaped the brunt of the fallout from the pandemic, and may even gain in terms of increased usage, other longstanding problems continue to fester. Not least of which is the uncertainty over Rs 1.47 lakh crore worth Adjusted Gross Revenue (AGR) dues.
The matter, pending before the Supreme Court, may still result in an immediate crisis and bankruptcy of Vodafone Idea if the court rules against the government’s proposal to spread the payments over 20 years.However, rating agency ICRA’s Ankit Jain says that even if the extended time is granted to telcos, they may have to shell out a cumulative Rs 9,150 crore every year to the Centre.