Telecom sector needs Rs 50,000 crore a year investment: Icra


Business, Companies

Almost all players have reported reverses in FY17 largely attributed to Jio's aggressive posturing.

IUC is a fee that a telecom company charges for receiving a call.

Mumbai: Stabilisation for telecom is still some distance away and the battered sector needs an investment of over Rs 50,000 crore annually, says a report. In a note released after a year of the deep-pocketed Reliance Jio's launch, domestic ratings agency Icra on Thursday said the troubles of the industry are far from over and "stabilisation (is) still some time away".

It said the last one year has seen initiation of consolidation, higher data usage, revamp of pricing plans, and greater focus on quality, technology, and content.

"Realisation of any upside from these changes is some time away with a difficult transition period. The pricing pressure currently visible is expected to translate into decline in profits for FY2018 as well," its sector head Harsh Jagnani said.

In what can only be interpreted as aggravating the troubles, where almost all the players have reported reverses in FY17 largely attributed to Jio's aggressive posturing, the agency said demand for capital will continue to remain high.

"The telcos would have to consistently invest in network capacity to keep pace with the strong data growth -- the capex intensity for the industry is expected to remain upwards of Rs 50,000 crore per annum," he said.

The agency said both the subscriber market share and the revenue market share of the three top telcos --- Airtel, Vodafone and Idea Cellular--have increased marginally and is illustrative of the marginalisation or exit of smaller

"This can be a major driver for the restoration of pricing power to the industry," it said. The higher pricing power, coupled with sticky data usage that grown to 1,000 MB per month from 200 MB in the year ago period, can be an "inflection point" of recovery.

"Sufficient pricing power is critical given the sizeable investment requirements and high operating leverage. The industry can achieve these objectives over the next 12-18 months," he said.