According to rating agency, CRISIL, the operating profit growth rate of mobile telecom companies is expected to double in next two years buoyed by increase in call rates and clarity in policy.
CRISIL forecasts a 20 per cent increase in the operating profits of large telecom companies over the next two years. This projected growth would be twice the operating-profit compound annual growth rate of about 10 per cent witnessed in the last five years. The rating agency states that operators have already raised tariffs in the last few months, however further clarity in policy making is going to drive the growth in the telecom sector.
CRISIL points out that as per the agency?s estimates there is still a 50 per cent gap between headline tariffs and average revenue per minute ARPM due to discounted call rates offered to many subscribers. However, with competitive intensity easing, operators are in a better position to reduce the discounts and bridge the gap. Further, the rating agency is of the view that the telecom sector?s pricing power will sustain over the next two to three years. For the CRISIL-rated large operators, ARPM stabilised in 2012-13, while it improved by about 5 per cent in the first half of the current fiscal as tariffs were increased by operators in select circles.
The rating agency forecasts that revenue contribution from data and value-added services could increase from 16 per cent in the last fiscal to 20 per cent in the next fiscal with large telecom players having witnessed data usage more than double in the first half of 2013, year-on-year. Moreover, with the regulatory clarity emerging on a number of issues, the industry is expected to witness encouraging growth. CRISIL states that the crucial issues of spectrum availability and pricing have been partially addressed with the finalisation of the reserve price for the next round of auction in January 2014. In fact, operators whose licences are set to expire are expected to actively bid in the January 2014 auction to protect their market position.
The rating agency concludes that while the upcoming auctions will help arrive at a market determined spectrum price, other regulatory issues such as one-time fees for excess spectrum, spectrum usage charges, re-farming of spectrum in the 900 MHz band and a framework for spectrum sharing and trading remain pending.
