Telecom Market Seems To Be In Negative Phase: Moody’s Forecast

Jul-2020 | IT & Telecommunications

Credit Rating Agency Moody's, while affirming a negative outlook on the telecom sector on Thursday, said that the increased competition between telecom service providers will keep pressure on their revenue and margins for the next 12 Months. It wrote in the 2018 India Corporate Outlook report stating that, the higher level of competition in the sector will continue to pressure the revenues and margins of telecom companies for the next 12 months.

It has also said that due to the excess capital expenditure, the fixed cost of companies in this sector will remain high in the next 12 to 18 Months due to weakness in profit margins. In September 2016, the revenue of all current telecom operators, including the market leader Bharti Airtel and the country's second largest telecom company, Vodafone India, was due to a destructive entry of Mukesh Ambani's company Reliance Jio.

Among all, Moody's also stated that after consolidation in the industry, the last four companies, Vodafone, Idea, Bharti Airtel and Reliance Jio, will be left in the sector. He says that telecom companies will have to sell their assets to reduce their debt burden. Bharti Group has agreed to sell 20% stake in DTH company Bharti Telemedia to Warburg Pincus for $350 Million for 4G infrastructure repair.

While commenting on the Bharti Airtel, it has been said that there are only three likely probabilities owing to which the rating could go down. If the overall operations work as expected, there can stability. If things don’t go well and there is a delay the ratings of Bharti Airtel might be dropped.

The firm also stated that, Telecom is the only sector where we see performance drop. The company projected that if the competition continues to be destructive there are high chances of heavy revenue and profitability loss.