Live news , top stories, corporate news, company news, sector news, economy news, results analysis news, ceo interviews, fund manager interview, advisor interview, market news, bazaar talk, hot stocks news, ipo news, commodities news, mutual fund news, insurance news, news wire
30 January, 2015 14:53 IST

Source: rss | 30-Jan-15
Comments  |  Post Comment

Fitch Ratings said on Wednesday the outlook for the Indian telecommunication (telco) sector in 2013 is negative, reflecting expected weaker balance sheets due to regulatory payments to re-acquire licences and continuing ability to raise tariffs, given the high level of competition. Government's decision to change its spectrum-allocation policy from a fixed-cost regime to an auction of all existing and future spectrum assets will significantly raise the cost of licences and spectrum, which will weaken the credit metrics of most telcos, if funded by debt.

The top-four operators by revenue market share - Bharti Airtel (Bharti, 'BBB-'/Negative), Vodafone India, Idea Cellular  and Reliance Communications - will have to pay significant amounts for a one-off charge for excess spectrum (above 4.4MHz), spectrum re-farming and future spectrum auctions. Fitch believes the one-off charge and refarming payments will occur in 2013.

The credit metrics of the other four private telcos are unlikely to improve significantly due to large capex needs, weak balance sheets, and more debt being incurred as they re-acquire their cancelled licences at significantly higher prices. Nationally owned telcos will continue to suffer operating losses due to high staff costs and subscribers with low average revenue per user (ARPU).

Ongoing Industry consolidation is unlikely to reduce overcapacity in 2013, as the market will remain competitive enough to prevent any sustainable rise in tariffs. Industry participants will come down to nine, from over 13 at the start of 2012.

Fitch believes the sector can afford at most only six profit-making operators in the long-term, and that average revenue per minute (ARPM) - currently the cheapest in the world at Rs 0.41-0.43 - needs to rise for the industry to be sustainable.

Fitch believes that the top-four operators' EBITDA margins (2012 simple average of 28%) are unlikely to improve much, due to a combination of competition, high initial 3G network costs and low ARPU for new users. Revenue in 2013 will rise only by the mid-single digits, in line with subscriber growth which should go up by an average monthly net addition of 3 million-5 million. Voice will remain the primary driver of revenue growth, while data's contribution to revenue will double to 7%-9% (2012: 4%-5%).

High interest costs, and capex required to meet growing data traffic and voice coverage, will keep 2013 free cash flow (FCF) margins low at around 2%-4% - insufficient to pay for regulatory payments. Fitch believes that Indian telcos' capex will run at around 20%-25% of revenue to meet rising demand.

Comments Post comment 
 Post Comment
Name Email
Comment
Security Code type    into this box
Related Articles
Tata Global Beverages consolidated quarterly earnings drop 29.54% - 30-Jan-2015 14:33
Mahindra Lifespace Developers standalone quarterly profit drops 34.87% - 30-Jan-2015 14:27
PVR consolidated quarterly profit soars 2.23 times - 30-Jan-2015 13:44
L G Balakrishnan & Bros standalone quarterly profit declines 14.95% - 30-Jan-2015 13:36
Whirlpool Of India standalone quarterly net up 1.36% - 30-Jan-2015 13:24
Magna Electro Castings standalone quarterly net drops 4.19% - 30-Jan-2015 13:21
Makers Laboratories swings to profit in Oct-Dec quarter - 30-Jan-2015 13:17
Empire Industries standalone quarterly profit rises 18.49% - 30-Jan-2015 13:10
'Subscribe' Coal India OFS: Angel Broking - 30-Jan-2015 13:02
Indoco Remedies standalone quarterly profit surges 53.12% - 30-Jan-2015 12:45
Angel Broking maintains Buy on HCL Technologies - 30-Jan-2015 12:05
more...
Home  |   Shares  |   F&O  |   Mutual Funds  |   Loans  |   Insurance  |   News Centre
Wealth Tracker  |   Newsletters  |   Tax Corner  |   NRI Centre  |   Advertise
© All rights reserved. IRIS Business Services Limited
A Disclaimer