Telcos\' revenue may grow 7 pc, network capex capped at Rs 90,000 cr in FY20

New Delhi: The telecom sector may reverse the revenue declining trend that it has seen in the past two years by recording 7 per cent growth this fiscal, with tariff war stabilising and subscribers spend likely to go up due to minimum recharge plans, Crisil said Tuesday.

The market research and credit rating agency also expects network capital expenditure (capex) for the top-three telcom operators to moderate to Rs 84,000-90,000 crore in 2019-20, compared with Rs 1 lakh crore in 2018-19.

"The Indian telecom industry will reverse a two-year declining trend with a 7 per cent revenue growth in fiscal 2020. The turnaround will ride on an increase in average revenue per user (ARPU) by 11 per cent though the overall subscriber base is expected to shrink by 4 per cent," Crisil said in a statement.

According to telecom regulator Trai's latest data, gross revenue (GR) and adjusted gross revenue (AGR) of the telecom service providers have been on the decline, barring few exceptions, after it peaked to Rs 73,344.66 crore and Rs 53,383.55 crore in the April-June 2016 quarter with ARPU at Rs 140.88.

GR and AGR (turnover from sale of telecom services) of the telecom service sector declined by 3.43 per cent to Rs 58,991 crore and 6.44 per cent to Rs 36,054 crore, respectively, in the three-month period ended December 2018.

The S&P Global-owned company estimates that the industry has lost around 20 per cent of potential revenue which is equivalent to around Rs 40,000 crore.

"Pricing aggression is expected to remain moderate and selective in fiscal 2020, given the new entrant has revenue market share leadership in more than 50 per cent of the 22 circles," Crisil Research Director Hetal Gandhi said.

Gandhi said price logs maintained by Crisil Research indicate that the prices of prepaid plans of leading telecom companies have in the past six quarters converged at around Rs 4 per gigabyte (GB) and have stabilised in the past two quarters.

After the launch of minimum recharge plans, telcos have been weeding out low-paying subscribers aggressively, Crisil said in the statement.

The debt of the company is also likely to come down to Rs 3.1 lakh crore during the ongoing fiscal with improvement in profitability and decline in capex.

In the three years through fiscal 2019, weak cash accruals and high capex had pushed up the debt of the top-three telcos to Rs 3.6 lakh crore from Rs 2.6 lakh crore, Crisil said.

"Debt protection metrics are expected to improve, with the interest coverage and debt-to-Ebitda ratios touching 2.5 times and 5.6 times by March 2020, compared with an estimated 2 times and 7.7 times, respectively, as of March 2019," Crisil Ratings Director Nitesh Jain said.

Jain added that despite the improvement, standalone debt metrics will remain weak and overall credit profile will continue to be supported by deleveraging plans and sponsors' support.