The quick pace of 5G deployment by telecom operators is likely to increase the capex intensity in the next 12 months, and with the fifth-generation services not being offered at a premium, the return on capital employed (RoCE) for telcos may see a limited upside, said rating agency India Ratings and Research (Ind-Ra) Tuesday in a report.<\/p>\n
\u201cInd-Ra does not foresee broad-based tariff hikes materialising in the near to medium term, given the heightened competition amid telcos recent attempts to acquire high-average revenue per user (ARPU) customers and aggressive 5G roll-out plans,\u201d it added. <\/p>\n
However, Ind-Ra expects ARPU to grow organically at around 5% year-over-year in FY24 due to likely tariff hikes resulting from pricing action in the low tariff bands and subsequent subscriber churn, as well as due to the rising composition of data users.<\/p>\n
The agency said that Reliance Jio and Bharti Airtel may continue to acquire market share from Vodafone Idea (Vi) especially in the high ARPU customer base.<\/p>\n
Both Jio and Airtel plan to complete their urban 5G coverage in Summer this year, and conclude pan-India roll out by December 2023 and March 2024, respectively. Vi is the only telco that has yet to launch its 5G network.<\/p>\n
For the telecom industry, Inda-Ra has maintained a neutral outlook for FY24.<\/p>\n
On the telecom tower industry ,the report said that the outlook remains deteriorating due to its dependency on cash-strapped Vodafone Idea; rising receivables; and the benefits of 5G rollout being back-ended.<\/p>\n
\u201cImpact of delayed receivables on tower companies\u2019 credit profile should be much worse, given their inability to delay fuel payments and lack of visibility on recoverability of pending dues (large provisioning done over the past one year). Continued capex intensity and aggressive dividend payout policies remain additional negatives,\u201d said the rating agency. <\/p>\n
The report mentioned that Indus Towers has already written off about Rs 50 billion of receivables due from Vi (contributing over 40% to Indus Tower\u2019s total revenue) in 9MFY23 and has collected only part of the recurring dues from Vi.<\/p>\n
\u201cTherefore, the ability of VIL to raise funding remains a key monitorable for tower companies,\u201d said Ind-Ra.<\/p>\n
Lastly, Ind-Ra said that the outlook for the telecom equipment manufacturers is neutral due to the strong demand drivers, both domestic and international, and due to a supportive regulatory environment like the current Production Linked Incentive (PLI) scheme.<\/p>\n
\u201cWith only two to three years since announcement and implementation, while some players have already received PLI benefit for one year, a large portion of the benefit will be received in the coming years, which is expected to support their margin profile. While the benefit of PLI scheme is extended by the government till FY26, the ability of the companies availing this benefit to maintain their margin profile after FY26 remains to be seen,\u201d said Ind-Ra.<\/p>\n","protected":false},"excerpt":{"rendered":"
The quick pace of 5G deployment by telecom operators is likely to increase the capex intensity in the next 12 months, and with the fifth-generation services not being offered at a premium, the return on capital employed (RoCE) for telcos may see a limited upside, said rating agency India Ratings and Research (Ind-Ra) Tuesday in a report. \u201cInd-Ra does not foresee broad-based tariff hikes materialising in the near to medium term, given the heightened competition amid telcos recent attempts to acquire high-average revenue per user (ARPU) customers and aggressive 5G roll-out plans,\u201d it added. However, Ind-Ra expects ARPU to grow […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-800085","post","type-post","status-publish","format-standard","hentry","category-telecom"],"acf":[],"_links":{"self":[{"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/posts\/800085","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/comments?post=800085"}],"version-history":[{"count":0,"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/posts\/800085\/revisions"}],"wp:attachment":[{"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/media?parent=800085"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/categories?post=800085"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/tags?post=800085"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}