NEW DELHI: Credit ratings agency Moody’s Thursday assigned negative outlook for telecom sector and said that the heightened rivalry between telecom service providers would continue to put strain on their revenue and margins over the next 12 months.
“Intensifying competition will continue to pressure revenues and margins over the next 12 months,” it said in its 2018 India Corporate Outlook finding.
New York-based Moody’s has ascribed stable outlook for most sectors in the non-finance sector except telecom sector which it has assigned with a negative outlook.
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It further added that weak profitability coupled with high capital expenditure will keep leverage elevated over the next 12-18 months.
Billionaire Mukesh Ambani-owned Reliance Jio’s disruptive foray in September 2016 led to the decline of revenue of all incumbent operators including market leader Bharti Airtel and India’s second-largest telco Vodafone India.
Moody’s, however, also said that industry consolidation would lead sector to become three-player market with Vodafone-Idea, Bharti Airtel, and new entrant Reliance Jio.
Asset monetization will be key for reducing leverage, it added.
Telecom operators are, however turning to monetize their assets in order to ease out financial burden.
Bharti Group has recently sold a 20% stake in DTH arm Bharti Telemedia to Warburg Pincus for $350 million (Rs 2,258 crore) to fund its 4G infrastructure deployment.
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Credit rating firm Icra recently said that the telecom sector could pare as much as Rs 90,000 crore debt if stake sale deals of mobile tower assets being underway eventually materialize.