ICRA expects Indian telecom industry to shell out around Rs 1-1.1 lakh crore on the upcoming auctions.

The tariff hikes implemented by the industry coupled with upgradation of subscribers to 4G from 2G and increase in usage of telephony services is expected to result in improvement in industry ARPU to around Rs 170 by the end of FY2023.

The sharp increase in mobile ARPU will be translating into growth in operating income by around 10-12 percent and OPBDITA by around 15-18 percent in FY2023, ICRA in its latest report said.

While telecom operators consider reserve prices to be very high, ICRA expects telcos to buy spectrum worth around Rs. 1.0-1.1 lakh crore in these auctions, which will be primarily towards developing 5G capabilities but also plugging other gaps.

TRAI had submitted its proposal on the spectrum auctions and has recommended a sizeable spectrum to be put out to auctions across various spectrum bands whose value at reserve price is around Rs 4.5 lakh crore.

TRAI has recommended auction of a sizeable spectrum across various bands including new bands – 600 MHz, 3300-3600 MHz and 24.25-28.5 GHz. The 700 MHz band remained completely unsold over the last two auctions and the prices of the same have been successively reduced.

Similarly, for the 3300-3600 MHz band, the prices have been reduced from the last recommended price. Despite the reduction, the prices remain elevated and the industry has opined that a further correction is needed in the same.

TRAI has come out with recommendations of relaxed payment terms, which allow telcos to pay for the spectrum in 20 installments thus ensuring very low upfront payment. This also avoids any dent on the liquidity position and is also likely to boost participation.

“This makes the basis for ICRA assumption of the participation in the upcoming spectrum auction to be around Rs. 1.0-1.1 lakh crore, in which the upfront payment is likely to be close to Rs 10,000 crore only. Adding this to the existing payments, the industry needs to shelve out Rs 17,000 crore annually towards spectrum instalments, till the moratorium ends,” Ankit Jain, Vice President and Sector Head, Corporate Ratings, ICRA, said.

While the upfront payment will be low, the participation will lead to an addition in deferred spectrum liabilities and the total debt of the industry. Debt remains a vulnerable point for of the industry. ICRA expects industry debt levels to increase to around Rs 5.7 lakh crore as on March 31, 2023, before moderating to Rs 5.3 lakh crore as on March 31, 2025.

Telcos have been focusing on deleveraging: Bharti Airtel concluded its rights issue of Rs. 21,000 crore and collected 25 percent as upfront payment. Vodafone Idea is scouting for a fund raiser. Addition of deferred liabilities continues to keep the debt levels elevated.

Indian telecom industry’s consolidated revenues are expected to be around Rs 2.6-2.7 lakh crore with OPBDITA of around Rs 1.2-1.3 lakh crore for FY2023. These are likely to translate into a ROCE of around 9-10 percent for FY2023 for the industry.