According to Axis Capital, the growth of telecom infrastructure providers like Sterlite Tech and Tejas Network will be hurt by a slowdown in government spending on projects like BharatNet and delay in 5G spectrum auction. To this end, the report suggests that challenges such as right of way (RoW) and lack of last-mile connectivity along with COVID-19 outbreak are likely to delay the completion of gram panchayats (GPs) internet connectivity project.
Axis Capital said that lack of approved detailed project reports, non-existent project implementing agencies, and non-availability of funds have been among other reasons for delays in BharatNet project.
Further, Axis Caapital highlighted that a reduction of government levies on telecom companies by 5 percentage points can improve their earnings before interest, tax, depreciation and amortisation (EBITDA) by 9 per cent -14 per cent.
As per the firm, to ensure survival of the industry, government should either introduce floor pricing or cut levies including spectrum usage charge (SUC) or license fee (LF). However, due to COVID-19, telecom regulator’s decision on floor pricing could be delayed.
Meanwhile, the report highlighted that Airtel is adding broadband or 4G towers faster than Vodafone Idea in the country. However, the telco is still catching up on the 4G network against Reliance Jio.
Airtel added 5,300 broadband towers per quarter in past three quarters against 1,500 per quarter for Vodafone Idea in India. As per the report, 99 per cent or 188,591 of Airtel’s towers are on broadband as compared to 86 per cent or 160,097 for Vodafone Idea.
Airtel added 18,700 base transceiver station (BTS) per quarter in nine month financial year 2020 (9MFY20) against 15,100 for Vodafone Idea.
However, as per the report, Airtel still lags behind Jio on tower fiberisation in India. Around 30 per cent of Airtel’s towers are fiberised against 60 per cent-70 per cent for Reliance Jio. This may constrain Bharti’s backhaul speed and act as a bottleneck for data growth on its network.
Meanwhile, Axis Capital added that, depreciation in Indian rupee and African currencies against the US dollar may raise the cost of imported telecom equipments, including for Airtel, pushing up the capital expenditure. As per Axis Capital, Airtel’s capex has been hit globally due to COVID-19 lockdown.