The telecom sector is on its path to recovery and a business model consolidation phase is on the anvil where telcos will offer a whole gamut of services beyond voice and become digital services providers. The stiff competition between the telcos may force the sector to become a 2.5+1 player market than the current 3+1 sector.
“India Ratings and Research (Ind-Ra) has maintained a stable outlook on the Indian telecom sector for FY22 as the agency believes that the sector will continue to show signs of recovery and in view of a conducive regulatory environment,” said the ratings firm. Ind-Ra has also maintained a stable outlook on its rated universe for FY22.
The increased data consumption and rising revenue from customers indicate that even without tariff hikes , the sector is moving towards a “higher- average revenue per user regime”.
Interestingly the rating firm said that it is the competition amongst the three telcos- Reliance Jio (Jio) , Bharti Airtel and Vodafone-Idea (Vi) has increased in the last one year which may bring accelerated consolidation.
” Ind-Ra believes that the evolution of the industry over the coming quarters will remain a key monitorable since it will determine whether the Indian mobility market will remain a 3+1 player market or will transition to a 2.5+1 player market and how telcos will respond to the next phase of consolidation in the industry,” said the report.
Besides the three private players, government-owned BSNL is the other telco.
‘…the second round of consolidation (Consolidation 2.0) is kicking in the industry, which will bring a transformation in the business models of telecom companies, leading to the evolution of incumbents from the providers of traditional voice-only services to complete digital solutions for households,” said the report.
In the consolidation phase, the rating firm said that telcos will provide a bundle of services like broadband, cable TV , enterprise solutions, e-payment wallets, music applications along with the usual voice services.
The first phase of consolidation happened post Jio’s entry in 2016 in which Vodafone India and Idea Cellular merged to form Vi, Aircel and (RCom ) went bust and consumer mobility was sold to Airtel in a cash-free , debt-free deal.
While the ratings of Jio (‘IND AAA’/Stable) are supported by timely financial support from its parent Reliance (‘IND AAA’/Stable), the ratings of Bharti Airtel Limited’s (debt rated at ‘IND A1+’) are supported by its diversified revenue profile and sturdy Africa business, said the ratings firm.
