ICRA Upgrades Telecom Services Industry Outlook To 'Stable'

The telecom tariff hike along with the recent relief package offers sufficient headroom for the industry to undertake deleveraging as well as fund capex for 5G tech upgrade, rating agency ICRA said on Wednesday revising outlook on telecom services sector to 'stable' from 'negative'.

The hike coupled with consistent upgradation of subscribers to 4G from 2G and increase in usage of telephony services is expected to result in improvement in industry ARPU (average revenue per user) to around Rs 170 by the end of 2022-23, it said.

The telecom industry has implemented the long-awaited tariff hikes which have the potential to improve the industry ARPU levels to around Rs 170 by the end of 2022-23, according to ICRA.

"This will result in increased profit generation, which coupled with the relief package announced by the government, provides enough headroom for the industry to undertake deleveraging as well as fund capex (capital expenditure) for the technology upgrade to 5G," the agency said.

Sabyasachi Majumdar, senior vice-president and group head (corporate ratings) of ICRA Limited, said the latest round of tariff hikes where telecom companies increased the prepaid tariffs by around 20 per cent will provide much-needed traction in the ARPU levels.

"We expect the industry revenues to grow by 18-20 per cent in 2022-23, followed by a growth of 10-12 per cent in 2023-24, which given the high operating leverage, is likely to translate in healthy expansion in operating profits, the same are projected to grow by around 30 per cent in 2022-23," it said.

"While the moratorium on the dues would impact the non-tax receipts of the government from the telecom sector, two telcos have pre-paid their dues towards earlier spectrum auctions totalling to Rs 26,300 crore thereby making up for the loss to the government," ICRA added further.

For 2021-22, the telecom sector is expected to contribute around Rs 54,000 crore to the government's non-tax receipts which will be close to the budgeted estimate for the fiscal, it estimated.

Debt, however, continues to remain the "Achilles' heel" of the industry, it warned.

ICRA expects industry debt levels to remain at around Rs 4.7 lakh crore as on March 31, 2022, before moderating to Rs 4.5 lakh crore as on March 31, 2023.

"Telcos have been focusing on de-leveraging and Bharti Airtel recently concluded its rights issue of Rs 21,000 crore and collected 25 per cent as upfront payment, while Vodafone Idea is also scouting for a fundraiser," ICRA said in a statement.