Sector to see delay in revival, says Icra

■ Telecom operators saw average revenue per user decline nearly 6%

New Delhi, March 27: Gross revenue of telecom services providers declined by 8.1 per cent while the licence fee collected by the government dropped by 16 per cent year- onyear in the quarter ended on December 31, 2017, a Trai report said.

The adjusted gross revenue ( AGR) earned by companies from sale of telecom services declined by 16.05 per cent to ` 38,536 crore in the reported on y- o- y basis.

“Gross Revenue ( GR) and Adjusted Gross Revenue ( AGR) of telecom service sector for the quarter ended December 2017 has been ` 61,089 crore and ` 38,536 crore respectively. The year- onyear ( y- o- y) growth in GR and AGR over the same quarter in last year has been (-) 8.18 per cent and (-) 16.05 per cent respectively,” the Trai’s quarterly performance indicator report said.

The licence fee which is collected from telecom service providers on the basis of AGR in turn declined by 16.04 per cent to ` 3,104 crore in OctoberDecember 2017 period from ` 3,249 crore in the same period a year ago.

The spectrum usage charge, which is also one of the major component of government’s revenue, declined by 29.72 per cent to ` 1,152 crore in the reported period from ` 1,639 crore in same period a year ago.

The revenue of access service providers ( ASPs) fell by 22.3 per cent during the period under review to ` 28,967.93 crore from ` 37,283.71 a year ago. The ASPs provide telecom services directly to consumers like Bharti Airtel, Reliance Jio, BSNL, MTNL, etc.

The monthly average revenue per user ( ARPU) earned by telecom service providers for GSM and 4G mobile services declined by 5.37 per cent to ` 79 in the reported period from ` 84 in the July- September 2017 period. There were 119 crore telephone subscribers in India at the end of December 2017. “Monthly ARPU for GSM service ( including LTE) declined by 23.61 per cent on y- o- y in this quarter,” Trai said in the report. The revival of the telecom industry is likely to be prolonged and the pressure on the cash flows of the industry may continue for a few more quarters due to intense competition, Icra said.

According to it, the price competition, which has exerted significant pressure on the telecom industry in FY18, continues to remain intense as the larger operators are contesting to acquire subscribers of the exiting telecom operators.

“The exit of smaller operators has provided an opportunity for larger telcos to garner subscribers and the competition for them remains intense. We expect the migration of subscribers from the exiting telcos to the continuing telcos to complete over the next six months. But till such time, the pricing levels in the industry are unlikely to witness material improvement. The trend of steady increase in average revenue per SIM, led by Jio’s plans, witnessed till December 2017 has since been reversed due to discounted price offering,” said Harsh Jagnani, sector head & VP, corporate ratings, Icra.

Over the last 15 months, the larger telcos have added 207 million active subscribers, a large proportion of which has come at the expense of discontinuing telcos, which have lost 122 million active subscribers over this period. Amidst this battle, the cash flows continue to suffer.

Icra expects FY18 revenues to decline by 13 per cent. Given the current levels of competition and pricing, recovery in revenues and profitability is expected only by end of FY19. But the debt levels, estimated at ` 4.7 lakh crore as on March 31, 2018, are expected to fall to ` 4.3 lakh crore by FY19 driven by monetisation and promoter support.

Over the long term, it expressed optimism regarding a recovery on the back of a consolidated structure, better pricing power and data usage with greater price- inelasticity.