Telecom Sector Will Not Be Impacted By Covid-19: ICRA Report

The battered telecom sector will not be impacted by the Covid-19 pandemic but it is payment of past dues of Rs 90,000 crore that creates uncertainty for the sector in these times, a report said on Thursday.

However, there is a chance that the debt levels of the industry, which moderated to Rs 4.4 lakh crore on March 31, 2020, will rise up further on account of dues incurring from the adjusted gross revenue, it said.

The telecom companies still owe Rs 90,000 crore in the AGR dues, and there is lack of clarity on how the money needs to be paid - whether staggered or at a go, ICRA said. There will not be any major impact of the ongoing nationwide lockdown due to Covid-19 on telecom services, the agency said.

Pressure on revenues on account of limited customer addition, along with lack of physical recharges is moderated by the increased mobile usage on account of work from home regime as well as content viewing, in addition to shift towards digital recharges, it said.

Debt reduction measures undertaken by telecom companies through routes like equity raising by Airtel and Vodafone-Idea, had seen the overall debt of the industry narrow to Rs 4.4 lakh crore from Rs 5 lakh crore. The AGR dues will lead to increase in debt in FY2021, ICRA said. Debt is expected to increase to Rs. 4.6 lakh crore as on March 31, 2021 despite the improvement in cash flow generation and moderation in capex intensity, it said.

The agency said the telecom industry, which witnessed severe headwinds in the past led by intense competition and pricing pressures amid elevated debt levels, had witnessed green shoots of recovery in FY20. There was a steady improvement in the average revenue per user, moderation in capital expenditure and also deleveraging, it said, adding that the tariff hikes in December 2019 were very beneficial.

ICRA expects an 18 percent revenue growth in FY21 for the industry, and an operating profit growth of 21 percent to Rs 75,000 crore.

On the AGR dues, assistant Vice President Ankit Jain said the 20-year payment plan as proposed by DoT results in annual payment of Rs 9,150 crore for the industry and dampens the financial succor provided by the deferment of the installment payments for two years to some extent. However, the same plan is yet to be approved, resulting in the uncertainty, the agency said.