“The intense price war since Reliance Jio Infocomm’s entry shows no signs of abating and is even more brutal now, which is why the pain is likely to continue in FY19, resulting in an adjusted gross revenue (AGR) skid,” Hetal Gandhi, director (research) at Crisil Ltd., told ET.
AGR, the revenue telcos derive from licensed services, stood at a shade over ₹1.16 lakh crore in FY18, based on data collated by the Telecom regulator. Crisil expects this number to shrink further this financial year, with earnings from data services likely to stay under pressure.
“The average realisation per MB (ARMB) has plummeted from 23 paise in FY16 to a mere 1.6 paise in FY18 and we see it falling further by end-FY19 because of the data pricing war led by Jio,” the Crisil director said.
Crisil expects “the corrosive effect of competition” to cut the combined gross revenue of the older telcos by 14-16% in FY19 as they may focus on “retaining subscriber market share.”
According to Naveen Kulkarni, an analyst at PhillipCapital, the industry’s revenue is “likely to get dragged down further this fiscal amid massive SIM consolidation and falling ARPUs visible in a rapidly consolidating sector.”
ARPU, or average revenue per user, is a key performance indicator for telcos. SIM consolidation refers to the reduction in the number of mobile connections, including multiple ones, as service providers merge, get acquired or wind up operations.
According to analysts, telco revenue pains have been exacerbated by an increase in interconnection usage charges (IUC), with free talktime plans triggering a greater number of calls and longer-duration calls.
Crisil’s Gandhi said this has negated the impact of a reduced IUC, with the jump in minutes of use increasing the burden for telcos. IUC, billed per minute, is paid by the telco from where a call originates to the network receiving it.
Analysts estimate that the full-year impact of the IUC cut will translate into a reduction of the Telecom industry’s operating margin (read: Ebitda margin) in the current financial year.
“The industry’s Ebitda margin is expected to contract a further 150-200 basis points (bps) owing to the fullyear impact of the cut in interconnect charges and Bharti Airtel, Vodafone India and Idea cellular will see a sharper deterioration,” said Gandhi. The three operators have about 70% of the country’s mobile users and receive more incoming calls than other networks.
The Telecom regulator cut the IUC for voice calls by 57% to 6 paise a minute, starting October 2017, from 14 paise a minute earlier.
Source link 2018-08-09 09:03:45