ICRA expects the telecom services industry to report moderate revenue growth of around 7-9% in FY2024 over FY2023 owing to muted average revenue per user (ARPU) expansion in the absence of tariff hikes in the near term. 5G network deployment has picked up pace in the recent past and the telcos have been expanding their 5G services in select pockets, as estimated by ICRA earlier. The roll-out entails densification of the network and sizable deployment of fibre, which is likely to increase the capex intensity in the near to medium term. This would keep debt levels elevated at around Rs. 6.1-6.2 lakh crore as on March 2024 (Rs. 6.3 lakh crore as on March 31, 2023).
Commenting on earnings growth, Mr. Ankit Jain, Vice President and Sector Head, Corporate Ratings, ICRA Ltd, said: "The three telcos together have achieved almost 75-80% penetration of 4G subscribers (around 800 million 4G subscribers) and thus the upgradation of subscribers has largely plateaued. Moreover, the 5G services launched by the telcos have not been monetised and there are no 5G specific plans, which could otherwise have boosted ARPU levels. These factors, combined with the absence of tariff hikes, are likely to result in a moderation in ARPU growth. ICRA expects industry ARPU to improve to Rs. 182-185 for FY2024 from Rs. 175 in FY2023. Consequently, the industry is expected to report a YoY revenue growth of 7-9% in FY2024, translating into OPBDITA expansion by 9-11% vis-a-vis FY2023. Industry consolidated revenues are expected at around Rs. 2.9-3.0 lakh crore with OPBDITA of around Rs. 1.5-1.6 lakh crore for FY2024. The revenue and OPBDITA growth thereafter is anticipated to be led by the next round of tariff hikes and monetisation of 5G services, along with growth in the non-telco business."
Apart from setting 5G network sites, the telcos are also increasing their spends on fiberisation as full scale 5G deployment will entail densification of network and thus sizeable investments in the same. ICRA expects the telcos to front load the capex in FY2024 and FY2025 causing the capex intensity to peak during this period and moderate thereafter.
Commenting on 5G capex, adds Mr. Jain, "The industry has been upfronting 5G capex and ICRA foresees industry capex at around Rs. 70,000 crore for FY2024 within an overall spend of around Rs. 3 lakh crore over the next 4-5 years. Accordingly, ICRA expects the total debt levels of the industry to remain unwieldy at around Rs. 6.2 lakh crore as on March 31, 2024. While the increase in deferred spectrum debt resulted in some moderation in metrics in FY2023, the debt/OPBDITA is subsequently projected to improve to ~4.2x and interest coverage to ~2.9x for FY2024, with further improvement in FY2025, with steady uptick in operating metrics even as the debt levels remain high."
The next phase of growth might kick in for the telcos once more subscribers join the 5G bandwagon, and telcos monetise this by releasing 5G-specific plans. Parallelly, increasing diversification by way of higher revenue share from enterprise business, digital services, fixed broadband services, cloud services, data centers, etc. is likely to foster future growth. |
