Indian telcos' operating profit is likely to rise by up to 15 per cent to Rs 1.2 lakh crore in FY24, a domestic rating agency said on Monday.
The players had reported an operating profit of Rs 1.04 lakh crore in the year-ago period, Crisil Ratings said.
Demand for bigger data packs amid surging consumption will be the key reason for the FY24 profit growth in an industry which has witnessed massive difficulties in the last few years, since the entry of the deep-pocketed Reliance Jio.
Average revenue per user (ARPU), which had been on a declining trend for the last few years, will grow by 8-10 per cent to Rs 190 despite no broad-based tariff hike likely in the near-term as telcos focus on migrating 4G subscribers to 5G services, its deputy chief ratings officer Manish Gupta said.
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"Growth would be driven by rise in data usage to 23-25 GB per subscriber per month this fiscal from 20 GB last fiscal, and recalibration of tariff plans, leading to higher operating profitability," Gupta said.
The agency said the sector has high operating leverage as about three-fourths of the total cost is fixed and any rise in ARPU flows directly to operating profit.
It said between FY20-23, operating profit almost doubled, while the ARPU grew 1.4 times.
The 4G technology will remain dominant for a while, it said, adding that monetisation of 5G services is likely to be gradual, as it hinges on evolving use cases and increase in the penetration of 5G handsets in India, which is currently low.
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The telecom companies may spend Rs 90,000 crore this fiscal to beef up network infrastructure in FY24 as against Rs 80,000 crore in the year-ago period, it said, adding that this will be driven by the surge in demand for data, and to improve services and customer experience.
All the private telcos are believed to be adequately placed on the important input of spectrum, having invested Rs 1.5 lakh crore at the previous auction. Hence, the outgo for spectrum purchase at the next auction is expected to be lower than the previous one, the agency said.
On the critical question of debt, the agency's director Naveen Vaidyanathan estimated the quantum to rise to Rs 6.5 lakh crore at the end of FY24 at an industry level from Rs 6.3 lakh crore in the year-ago period, driven majorly by the 5G investments.
"Yet, the leverage of telcos rated by CRISIL Ratings should improve because of better profitability. Their ratio of debt to EBITDA is foreseen at 3.0 times this fiscal, compared with 3.3 times last fiscal," he added.
The agency said larger than expected investments in 5G networks and spectrum will have a bearing on the credit metrics and hence, is a key monitorable going ahead.
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