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    Home»News»Telecom industry debt levels likely to increase with the 5G spectrum auctions
    News

    Telecom industry debt levels likely to increase with the 5G spectrum auctions

    MOBILITY INDIABy MOBILITY INDIAJune 16, 2022Updated:June 16, 2022No Comments3 Mins Read
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    The telecom industry has been witnessing green-shoots of recovery. The tariff hikes implemented by the industry participants 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 (excl. BSNL) to around Rs. 170 by the end of FY2023, translating into growth in industry operating income by around 10-12% and OPBDITA by around 15-18% in FY2023. ICRA in its latest report has highlighted that the Indian telecom services industry is on the brink of a technology upgrade to 5G While telecom operators consider reserve prices to be very high, nonetheless ICRA expects telcos to buy spectrum worth around Rs. 1.0-1.1 lakh crore in these auctions, which will be primarily towards developing 5G capabilities but also plugging other gaps. While the upfront payment is likely to remain low, as TRAI has recommended an elongated payment plan, the total debt on the industry is likely to increase which is likely to keep the debt metrics subdued. 

    Mr. Ankit Jain, Vice President and Sector Head, Corporate Ratings, ICRA Ltd

    According to Mr. Ankit Jain, Vice President and Sector Head, Corporate Ratings, ICRA Ltd, “TRAI has come out with recommendations of relaxed payment terms, which allow telcos to pay for the spectrum in 20 instalments thus ensuring very low upfront payment. This also avoids any dent on the liquidity position and is also likely to boost participation. This makes the basis for ICRA assumption of the participation in the upcoming spectrum auction to be around Rs. 1.0-1.1 lakh crore, in which the upfront payment is likely to be close to Rs. 10,000 crore only. Adding this to the existing payments, the industry needs to shelve out only Rs. 17,000 crore annually towards spectrum instalments, till the moratorium ends.”

    While the upfront payment will be low, the participation will lead to an addition in deferred spectrum liabilities and thus the total debt of the industry. Debt continues to remain a vulnerable point for of the industry. ICRA expects industry debt levels to increase to around Rs. 5.7 lakh crore as on March 31, 2023, before moderating to Rs. 5.3 lakh crore as on March 31, 2025. Telcos have been focusing on deleveraging: Bharti Airtel Limited recently concluded its rights issue of Rs. 21,000 crore and collected 25% as upfront payment, while Vodafone Idea is also scouting for a fund raiser. However, addition of deferred liabilities continues to keep the debt levels elevated.

    Adds Mr. Jain, “The telecom operators implemented a round of tariff hikes in Q3FY2022, which 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 (excl. BSNL) to around Rs. 170 by the end of FY2023. The industry is expected to report a growth of 10-12% in its operating income in FY2023, which will translate into OPBDITA expansion by 15-18%. Industry consolidated revenues are expected to be around Rs. 2.6-2.7 lakh crore with OPBDITA of around Rs. 1.2-1.3 lakh crore for FY2023. These are likely to translate into a ROCE of around 9-10% for FY2023 for the industry.”

    If you have an interesting Article / Report/case study to share, please get in touch with us at editors@roymediative.com/ roy@roymediative.com, 9811346846/9625243429.

    5G spectrum auctions ICRA in its latest report likely to increase technology upgrade to 5G Telecom industry debt levels witnessing green-shoots of recovery
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