The telecom tariff hike is imminent as service providers need to make sizeable payouts on statutory dues, spectrum buys, regular revenue share obligations and auction instalments, making ARPU expansion critical, Icra Ratings said on Thursday.
Pointing to the sector's debt levels and the pressing need for companies to bring it down, Icra said that given the "precarious position" of the balance sheet of the industry, "India is likely to give a miss to the 5G call for some time".
Further, it said that despite some easing of competitive intensity, it is still some time to go before the tough competition recedes.This is because it is unclear whether the next round of tariff hikes would be across the industry or limited only to telcos facing adjusted gross revenue (AGR) payment.
"...ARPU improvement and further tariff hikes are on the cards, given the fact that telecom service providers are required to make sizeable payouts in terms of AGR liabilities, spectrum purchase, regular revenue share to the government and auction instalments (which start from fiscal 2023)," Icra said in a statement.
Hence, a sustainable and sizeable average revenue per user (ARPU) expansion is critical.
"While the industry still grapples with elevated debt levels and weak debt coverage metrics, the last fiscal has witnessed some respite in terms of steady ARPU improvement driven mainly by the tariff hikes implemented in December 2019, the deleveraging measures are undertaken by the telcos, and moderation of capex intensity," said Anupama Arora, Vice President and Sector Head, Corporate Ratings, Icra.
And though clarity has emerged around the AGR issues, the relatively short timeframe allowed by the Supreme Court acts as a "dampener", Arora said.