Battered telcos are staring at another difficult year with domestic ratings agency Icra estimating an additional 6 per cent dip in growth and a massive 28 percent shave-off in pre-tax profit this financial year, reported PTI.
This is over and above the 5 per cent decline in revenue to Rs 2.56 trillion in FY17, which pulled down their pre-tax profit by 10 per cent to Rs 64,000 crore.
"Competition has impacted revenue generation and profitability of all the players in H2 of FY2017, after Rjio launch...We have a negative outlook on the sector," the agency's sector head Harsh Jagnani told reporters over a conference call.
Even as the RBI has asked banks to increase provisions on telco exposures fearing asset quality issues, Icra said the total debt of the sector will grow by Rs 20,000 crore to Rs 4.8 trillion by next March.
Banks have an exposure of Rs 1.1 trillion to the sector, as the rest of the debt is foreign currency- denominated and domestic corporate bonds.
Without directly commenting on whether banks should expect any stress, he said debt servicing will be an issue with the liquidity gap widening to Rs 70,000 crore. The gap is calculated by taking into account the entire inflows and outflows.
Apart from that, with the fall in pretax profits and rise in debt levels, there will be a deterioration in gross- debt to pretax profit ratio to over 10 times as of March 2018, it estimates.
Jagnani also said rollout of goods and services tax is a negative for the sector but is not the biggest of the worries. The ongoing consolidation in the sector will help operators regain some pricing power which is waning at present, he said, adding this will not happen till the mid of 2018.