India’s telecoms sector could see 40% drop in Q4 revenues: ouch!

india telecoms sector
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ITEM: If you thought India’s telecoms sector was in bad shape financially – well, you’re right, and it’s reportedly going to get worse, with local analysts expecting the latest quarterly revenues to drop as much as 40%.

According to a report from ET Telecom, ratings agency Crisil says that aggressive competition from Reliance Jio, TRAI’s cuts to interconnect usage charges, RCom shutting off its 2G service and efforts by the incumbents to retain high data users will hurt revenue growth for the quarter ending March 31 – the last quarter of the fiscal year. Crisil reckons overall revenue will drop up to 40% for the quarter.

Other firms weighed in on FYQ4, the report said, and none had anything positive to say:

  • Kotak Securities forecast “another quarter of sharp sequential revenue decline” thanks to Jio’s pricing antics, dropping ARPUs and cuts in international termination rates in February.
  • Domestic brokerage Motilal Oswal estimates Bharti Airtel will report an 80% decline in profits and Idea Cellular will report widening losses.
  • Emkay Global Financial Services expects telecoms sales to decline just over 10% year on year, while pretax margins will shrink 2.4%.

All up, analysts are expecting a dismal end to a dismal fiscal year for India’s struggling telecoms sector. And it’s anyone’s guess whether 2018 will be any better.

On the one hand, the competitive landscape is shrinking, with Airtel, Jio and the combined Vodafone-Idea expected to be the last ones standing – Reliance Communications is selling its wireless assets to Jio (or attempting to, anyway) and Aircel filed for bankruptcy last month.

On the other hand, analysts and industry observers have also said that even with badly needed market consolidation, it’s going to take time for that to translate into financial recovery – and how much time that takes will depend on everything from Jio’s pricing shenanigans to government and regulatory policies that critics say seem designed to make it harder for cellcos to either earn money or spend less of it.

In particular, the government seems keen on pushing the mobile sector to adopt 5G by 2020 at a time when everyone is still struggling to roll out 4G. The government is expected to release its 5G development roadmap in the next few months, but it will be asking a lot for cellcos to invest even more capex into a technology for which no devices will be available at scale and at mass market prices until well after 2020.

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