Telecom Industry Estimated To See Moderate Revenue Growth, Capex To Reach Rs 70,000 Crore In FY24: ICRA

The telecom industry is expected to post a revenue growth of 7-9 per cent in fiscal year 2023-24 (FY24), in comparison to the previous year. 

ICRA expects the telecom industry to keep investing in developing infrastructure for the deployment of 5G in the upcoming years.

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The telecom industry in India is estimated to display moderate growth in it’s revenue in the current fiscal year, stated ICRA in a release. The investment information and credit rating agency said the telecom industry is expected to post a revenue growth of 7-9 per cent in fiscal year 2023-24 (FY24), in comparison to the previous year. 

According to a PTI report, ICRA noted that the moderate pace of growth is due to the slowdown in the expansion of average revenue per user (ARPU) in the absence of tariff hikes in the short term. 

The agency expects the industry to keep investing in developing infrastructure for the deployment of 5G in the upcoming years. ICRA predicts that the sectoral capex for the industry stands at Rs 70,000 crore for the current fiscal year, and about Rs 3 lakh crore can be expected to be spent over the next 5 years. The expense of 5G infrastructure includes densification of the network and fibre deployment. This is expected to keep the debt levels towards the higher end, around Rs 6.1 to 6.2 lakh crore, as of March 2024, against Rs 6.3 lakh crore as on March 31, 2023. 

ICRA’s vice president and sector head for corporate ratings, Ankit Jain, added, “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,” as cited in the report. 

While the industry average realisation per consumer (ARPC) is expected to improve from Rs 175 in the previous fiscal year to Rs 182-185 for FY24. Jain explained, “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.”

The agency expects the next round of tariff hikes, monetisation of 5G services, and growth in the non-telco business to drive the growth in revenue and OPBDITA (Operating profit before depreciation, interest, and taxes) for the industry. Telecom companies are expected to frontload the capital expenditure in this fiscal year and the upcoming one, with the capital expenditure intensity to grow at a high pace in the current year and a moderate pace later. In addition to establishing 5G network sites, another major expense for the companies is to spend on fiberisation to deploy 5G on full scale, the report noted. 

The telecom industry is expected to witness more growth once the 5G subscribers come in and companies can monetise this with 5G-specific plans. Additionally, other factors expected to contribute to growth in the future include increasing diversification by the method of higher revenue share from enterprise businesses, digital services, cloud services, and more.