The rise in telecommunications tariffs as well as the recent relief plan provide enough leeway for the sector to undertake deleveraging as well as investment funds to upgrade 5G technology, the agency said on Wednesday. ICRA rating revising the outlook for the telecommunications services sector from “stable” to “negative”.
The rise associated with the steady upgrade of 4G subscribers from 2G and the increase in the use of telephony services is expected to lead to an improvement in the ARPU (average revenue per user) of the industry to approximately Rs 170 by the end of 2022-2023, he said.
The telecommunications industry has implemented the long-awaited tariff increases which have the potential to improve the industry’s ARPU levels to around 170 rupees by the end of 2022-2023, according to ICRA.
“This will result in increased profit generation, which together with the relief package announced by the government, will give enough leeway for the industry to undertake deleveraging as well as capital expenditure (capital expenditure) for the technology upgrade to 5G,” the agency said. .
Sabyasachi Majumdar, Senior Vice President and Group Head (Business Valuations) of ICRA Limited, said the latest round of rate hikes, in which carriers raised prepaid rates by around 20%, will provide a Essential traction at ARPU levels.
“We expect industry revenue to grow 18-20% in 2022-23, followed by 10-12% growth in 2023-24, which given high operating leverage is expected to increase .translate into a healthy expansion of operating activities.profits, the same are expected to increase by around 30% in 2022-2023,” he said.
“While the moratorium on dues would impact government non-tax revenue from the telecom sector, two telecom operators have prepaid their dues for past spectrum auctions totaling Rs 26,300 crore, making up for the loss to the government added CIFAR.
For 2021-2022, the telecom sector is expected to contribute about Rs 54,000 crore to government non-tax revenue which will be close to the budgeted estimate for the year, he said.
Debt, however, continues to remain the “Achilles heel” of the industry, he warned.
ICRA expects industry debt levels to remain at around Rs 4.7 lakh crore as of March 31, 2022, before declining to Rs 4.5 lakh crore as of March 31, 2023.
“Telecom operators have been focused on deleveraging and Bharti Airtel recently finalized its Rs 21,000 crore rights issue and raised 25% as upfront payment, while Vodafone Idea is also looking to raise funds,” said CIFAR in a press release.