|
|
|
Telcos seen reviving after 3 years of price wars: Report
|
|
|
|
Top Stories |
|
|
|
|
SME Times News Bureau | 15 Jan, 2020
After a prolonged period of pain, the Indian telecom sector has got a
fresh lease of life, thanks to the recent unprecedented tariff hikes and
the government's efforts to revive profitability, a brokerage firm
report said on Tuesday.
"We believe the recent tariff hike is a
beginning of trend reversal with more price hikes to come in 2020. The
incremental price hike is a function of support for VIL (Vodafone Idea
Ltd) and the needed profitability boost to RJio and Bharti. This could
be a turning point for the industry, wherein incremental capital
commitment would decline with players agreeing on better tariffs," a
Motilal Oswal report said.
"With the recent positive developments
in the industry and potential trigger points, we believe that the
sector offers strong operating, financial and valuation leverage. While
Vodafone Idea would need more measures for its survival, RJio and Bharti
stand to benefit significantly from further relief measures", it said.
The
brokerage said that to address the risk of the looming adjusted gross
revenue (AGR) liabilities and to alleviate the financial stress, telecom
companies have announced strong 25 per cent average revenue per user
(ARPU) increase, which should add Rs 293 billion/Rs 190 billion to the
industry's overall revenue and EBITDA (earning before interest, tax,
amortisation and depreciation) in 2020-21.
"However, given the
second sim card phenomenon, we estimate there could be 20-30 per cent
leakage (partly factored in), which could be more pronounced for weaker
players due to the risk of customers retracting back to the primary sim
(and thus, reduce their subscriber base)", it added.
According
to the report, RJio has the highest share of smartphone devices
(estimated at 79 per cent), and, therefore, could see the highest gain.
On
a second quarter 2019-20 annualised basis, Bharti's consolidated
revenue/EBITDA can rise by Rs 112 billion/Rs 81 billion, while RJio's
revenue/EBITDA should increase by Rs 133 billion/Rs 96 billion, it said.
VIL is likely to see the highest operating leverage given its
lowest EBITDA margin, and subsequently its revenue/EBITDA should
increase by Rs 102 billion/Rs 74 billion, it added.
Telecpm
companies have devised price plans in a manner where there is limited
risk of downtrading, as data volume offerings have reduced by over 90
per cent for the base plan, which is priced 25 per cent lower.
Besides,
the industry ARPU increase was hinged on three key triggers -
ballooning leverage, negative free cash flow, and "reducing
network/pricing arbitrage". This had led to slowing subscriber churn and
limited growth opportunities, thus compelling telcos to keep ARPUs on a
growing trajectory, the report said.
"To resolve the telecom
industry's near-term cash flow issues and to alleviate financial stress,
the government is exploring (a) telcos plea of offering moratorium for
AGR liability and the possible reduction in penalty and interest, (b)
GST input tax credits of Rs 80-90 billion for Bharti/VIL, (c) reduction
of the current UFO obligation, which stands at 5 per cent, thus reducing
license/spectrum fee to 5-6 per cent from the current 12 per cent" it
said.
However, these could be long-drawn processes as approval of the GST Council and the Finance Ministry is needed, it added.
Also,
TRAI has decided to continue with the current regime of interconnection
usage charges (IUC) of Rs 0.06/minute until December 2020 and defer the
zero charges to January 2021, "which would benefit Bharti/VIL by Rs 10
billion/Rs 13 billion," the report noted.
|
|
|
|
|
|
|
|
|
|
|
|
|
Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
|
|
Daily Poll |
|
|
PM Modi's recent US visit to redefine India-US bilateral relations |
|
|
|
|
|
Commented Stories |
|
|
|
|
|
|
|
|