Telecom Firms May Witness 6 Per Cent Revenue Growth In 2020

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The entry of a new player Reliance Jio in late 2016 changed the dynamics of the telecom industry.

The telecom industry may see a modest price increase in fiscal 2020, which can improve their revenues and profits.

In the last few months, there have been some signs of stabilisation in average revenue per user (ARPU), according to a report by rating agency Icra. ARPU is a key matrix to show profitability for telecom players.

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As the telecom industry continues to witness intense competition and limited pricing power, fiscal 2019 would be the third consecutive year of revenue decline, the report said.

Industry revenues declined 11 per cent in fiscal 2018 to Rs 2.1 lakh crore, and are expected to fall further 7 per cent in fiscal 2019. The industry Ebitda is estimated to reduce by 18 per cent in fiscal 2019, following a 21 per cent erosion in fiscal 2018 (Rs 49,000 crore).

The entry of a new player Reliance Jio in late 2016 changed the dynamics of the telecom industry. Jio brought in intense price-based competition, which is still continuing.

It (severe competition) has resulted in severe deterioration in the financial performance, marked by a decline in revenues, lower profitability (even losses for some talks) and low cash generation, Icra stated.

The higher data usage could result in more consolidated and stable industry structure with some pricing discipline in fiscal 2020.

As of now, there is limited visibility of the industry achieving the peak revenues seen in fiscal 2016. The subscriber base of the industry has not seen significant growth over the last two years. It stood at 117 crores as of December 2018, and a moderate addition is expected, going forward.

The pressures on the industry have led to a reduction in non-tax revenues of the government, with lower license fee (LF) and spectrum usage charges (SUC). These two-combined declined by 24 per cent in fiscal 2018 and are expected to decline further in fiscal 2019. Further, the exits by some operators may result in a sizeable quantum of spectrum, around 551 MHz across bands, to be repatriated back to the government.

Icra expects fiscal 2019 and fiscal 2020 non-tax revenues from the sector to be in the range of Rs 35,000-40,000 crore per year.

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