Telecom sector may see 14-16% rev growth in FY16: Crisil

India’s wireless industry revenues are estimated to grow at 13-14 percent in FY15, an increase from 12 percent year-on-year on reduced competition that has improved both minutes of usage (MoU) and realisations per minute (RPM, owing to the reduced quantum of free and discounted minutes), especially for the large operators, says Crisil. Revenue growth also got a boost from increase in data subscriber base and rapid rise in data usage, the rating agency says.

In FY16, healthy growth in data volumes – spurred by increasing adoption of 3G and 4G services – is expected to lift revenue growth to 14-16 percent, as per CRISIL Research estimates.

Further margin expansion in 2015-16 appears unlikely, owing to expected pricing pressures and rise in costs post the service launch by Reliance Jio Infocomm (the only operator with pan-India 4G spectrum), though the extent of pressure would be determined by how aggressive Jio is on the pricing side, says Crisil. "Also, network operating costs will continue to rise as operators look to expand their network reach by adding more cell-sites," the report states.

From a short- and medium-term perspective, the entry strategy of Reliance Jio is expected to have a significant bearing on future pricing power of operators, it adds.

In the next round of spectrum auctions, which are scheduled to commence on March 4, 2015, aggressive participation is expected from operators, particularly in the 900 MHz frequency, the report says. These licences are significant as a substantial proportion of operator revenues are earned in circles where renewals are due, Crisil says.

“Payouts are expected to stay high, just as in the previous auctions held in February 2014, where the total operator outgo for spectrum stood at Rs 612 billion,” the Crisil report says.