Indian telecom sector poised for next stage of market repair: S&P Global Ratings

New Delhi, July 11: The Indian telecommunications industry looks set for the next phase of market repair, as it settles more stably into a three-player market, a report showed on Thursday.

According to a report by S&P Global Ratings, rising stability in the sector will boost earnings and solidify credit metrics.

“We believe entities will take the opportunity to embark on a much-needed focus on improving earnings and balance sheets. Investors will likely remain willing to amply fund the top three players,” the report noted.

Vodafone Idea’s recent equity raising has bolstered its viability.

“We assume that the two biggest entities -- Bharti Airtel and Reliance Jio Infocomm -- will now focus less on market share gains, and more on improving profits and improving their balance sheets,” the report mentioned.

The telcos have boosted their average revenue per user (ARPU) over the past three years.

The latest round of 15-20 per cent mobile tariff hikes for prepaid and postpaid plans by telecom service providers (TSPs) can result in additional operating profits of around Rs 20,000 crore for the industry once these hikes are fully absorbed, according to industry experts.

S&P Global Ratings expects ARPUs to rise faster, after having slowed in the past 12-24 months.

However, the gains mainly reflect tariff hikes and rising demand for fast data.

“That said, in an industry defined by intense rivalry, steep spectrum costs, and unexpected regulatory shifts, an issuer's financial cushion will remain key to its long-term viability,” it noted.

A stabilised three-player market will likely boost earnings.

“We believe Bharti Airtel and Reliance Jio may now focus on improving returns. This would be a shift from their prior stance of market share gains,” said the report.

--IANS

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