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Telecom sector’s stress likely to continue for a few more quarters, says ICRA

March 27, 2018

According to ratings agency ICRA, the revival of India’s telecom sector is likely to be prolonged and the pressure on cash flows of service providers might continue for a few more quarters. According to the firm, the price competition has exerted significant pressure on the Indian telecom industry in 2017-18. This pressure is expected to continue to remain intense as the larger operators are contesting to acquire subscribers of the exiting operators. However, on a longer term, recovery is expected in the sector owing to a consolidated structure, better pricing power and data usage with greater price-inelasticity.

The industry estimates pegged industry’s consolidated debt at around Rs 5 trillion amid hyper competition. The industry’s debt levels are expected to witness some reduction by way of promoter funding and asset monetization, down from Rs 4.7 trillion in March 2018 to Rs 4.3 trillion by 2019.

Further, ICRA expects 2017-18 revenues to decline by 13 per cent and OPBDITA to decline by 34 per cent. Given the current levels of competition and pricing regime, recovery in revenues and profitability, according to the firm, is likely by end of 2018-19. The exit of smaller operators has provided an opportunity for larger ones to add subscribers. The agency expects migration of subscribers to be complete over the next six months. Till such time, however, pricing levels are unlikely to witness material improvement.

 

 
 

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