FY24 growth forecast at 7-9% for telecom sector

New Delhi The telecom services industry is expected to post moderate revenue growth of 7-9 per cent in FY 24, due to muted average revenue per user (ARPU) expansion in the absence of tariff hikes in the near-term, ICRA said. The industry has been “upfronting” 5G capex (capital expenditure) and ICRA foresees sectoral 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. ICRA believes that the ongoing 5G 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 (as against Rs 6.3 lakh crore as on March 31, 2023). “ICRA expects Athe telecom services industry to report moderate revenue growth of around 7-9 per cent in FY2024 over FY2023, owing to muted average revenue per user (ARPU) expansion in the absence of tariff hikes in the near-term,” ICRA said in a release. Ankit Jain, Vice President and Sector Head, Corporate Ratings at ICRA noted the three telcos have together achieved almost 75-80 per cent penetration of 4G subscribers (around 800 million 4G subscribers) and hence 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,” Jain added. ICRA expects industry ARPU (average realisation per consumer) to improve to Rs 182-185 for FY2024 from Rs 175 a year ago. Consequently, the industry is expected to report a year-on-year revenue growth of 7-9 per cent in FY2024... Industry consolidated revenues are expected at around Rs 2.9-3 lakh crore with OPBDITA of around Rs 1.5-1.6 lakh crore for FY2024,” according to Jain.

The revenue and OPBDITA (Operating profit before depreciation, interest and taxes) growth there after is expected to be driven by the next round of tariff hikes and monetisation of 5G services, along with growth in the non-telco business.