Telcos face funding challenge amid tariff war, eroding revenue
NEWDELHI:With eroding revenues and little hope for a recovery in the near term, telecom operators in the midst of a tariff war also face an unfavourable funding climate as they expand 4G network roll-outs and gear up for the introduction of 5G.
The Cellular Operators Association of India (COAI) says the sector needs massive investments.
“We would need $10 billion a year for the next 5-6 years to just fund the network requirements of the industry…In the next two years, you need to make investments for 5G, and that is not 10-20 MHz (spectrum) per operator, it is 100 MHz…how will we fund this?” Rajan Mathews, director general of the telecom lobby wondered.
Telecom has always been a cash-guzzling business with regular investments needed to buy spectrum and deploy networks. The challenge has become acute after the entry of Reliance Jio brought down tariffs, and the telecom regulator’s decision to halve interconnection usage charges (IUC), levied by mobile operators receiving calls on their networks. While Idea Cellular’s loss more than tripled to ₹1,285.6 crore in the December quarter, its bigger rival Bharti Airtel reported a 39% fall in December quarter profit to ₹306 crore.
“Market cap of Indian telcos is lower than that of operators in other parts of the world. We are skeptical of any significant improvement in topline in near term for most. Topline growth requires a lot of work and investments, which will take time. Telcos need a disciplined approach to bring down costs. They also need to start targeting other segments and move away from the ones that are not generating return,” said Amresh Nandan, research director at Gartner.
On their part, telcos have started paring stake in non-core assets. Last year, Bharti Airtel said it plans to sell 20% stake in its DTH arm Bharti Telemedia Ltd to Warburg Pincus for $350 million, apart from planning to sell a controlling stake in tower arm Bharti Infratel Ltd.
Vodafone India and Idea Cellular have agreed to sell their respective standalone towers, totalling 20,000 towers, to ATC Telecom Infrastructure for around ₹7,850 crore. Idea Cellular also plans to monetise its 11.15% stake in Indus Towers.