Indian telecom operators such as Bharti Airtel, Vodafone Idea and Reliance Jio are expected to invest around Rs 70,000 crore or nearly $9.8 billion during financial year 2019-20, India Ratings and Research said.
The annual Capex from Bharti Airtel, Vodafone Idea and Reliance Jio have estimated to reach nearly Rs 68,600 crore during fiscal year 2018-19. This shows that three leading operators will not be making significant increase in their investment in the coming fiscal year.
The investment of Bharti Airtel, Vodafone Idea and Reliance Jio will be almost equal during the fiscal since Vodafone Idea will also be stepping up their investment in 4G networks and fiber, said Tanu Sharma, associate director of India Ratings and Research.
No to 5G in 2020?
Bharti Airtel, Vodafone Idea and Reliance Jio will be aiming for 5G launch later as they plan to make investment in fiber across the country.
The Capex-to-revenue ratio for private sector telcos will remain at 25-30 percent in fiscal 2019-20.
Telecom operators may not actively participate in 5G spectrum auctions because of several reasons including other Capex priorities, the immature ecosystem for 5G, and stretched leverage profiles.
ARPU to improve
India Ratings and Research has maintained a negative outlook on the telecommunications services sector for fiscal 2020. The pricing recovery is unlikely to be sufficient to compensate for the revenue loss witnessed in the preceding two years. EBITDA for the top two private telcos will improve.
The focus of operators will shift to average revenue per user (ARPU) from subscriber market share. The share of 4G subscribers, who offer higher ARPU, will be a critical profitability indicator.
Overall subscriber growth will remain muted or it could even witness a decline, as India is a dual-SIM market. The ARPU is likely to improve in the second half as the minimum recharge plans launched by Bharti Airtel and Vodafone Idea will weed out low ARPU customers.
Jio to lead
Reliance Jio Infocomm will increase its market share in terms of subscribers and revenue from Bharti Airtel and Vodafone Idea in FY20 and could eventually emerge as the largest telecom player in the industry.
The net debt of Bharti Airtel, Vodafone Idea and Reliance Jio at end-FY19 is estimated to be around INR3 trillion, implying net leverage of over 6x for the sector. Telcos will continue to require equity infusion and asset monetisation to deleverage.
Airtel plans to raise fresh equity of INR150 billion in FY20 to improve its capital structure. Vodafone Idea plans to raise equity worth INR 250 billion from its sponsors in Q4 FY19. Vodafone Idea also plans to monetize its 11.15 percent stake in Indus and 156,000 Km of intra- and inter-city fibre assets.