Kolkata: Sharp depreciation of the rupee against the US dollar will move up telco network capex outflows in FY23 and also a marginal increase in interest payments on dollar debt, analysts and . say industry executives.
Such a scenario, they said, could prompt operators to pass these higher costs on to consumers later this year through another rate hike. But they warned that any imminent price hikes will likely be around 10% at best, as anything higher could increase churn and reduce mobile broadband service usage, hurting telcos’ revenues in coming quarters. would harm.
On Thursday, the Indian rupee had reportedly surpassed the psychologically important 80 for the US dollar in the over-the-counter and derivatives markets on the expectation that portfolio investors would accelerate the sale of local stocks, while reducing the likelihood of the US Fed cutting interest rates. would increase. by as much as 100 basis points later this month to curb accelerating inflation. A basis point is 0.01 percentage point. On Friday, it traded to the greenback at Rs 79.90.
“(Network) capex (for telcos) could rise by up to 5% (year-on-year) due to the depreciation of the Indian rupee,” Nitin Soni, senior director (corporates), at global rating agency Fitch, told ET
He expects that the depreciation of the rupee will also increase “interest costs”. airtelU.S. dollar debt,” though he claims the total interest cost of the Sunil Mittal-led telco would fall in FY23 as a result of debt reduction.
However, JP Morgan does not foresee that a depreciation of the rupee would pose a “significant risk” to Airtel’s interest costs. This, as it says that only $5.1 billion of Airtel’s debt is in US dollars, or 29% of its total debt. “Half of this (read: $5.1 billion) is in the African business where earnings are also in US dollars, and our analysis suggests that a 1% depreciation of the rupee versus the US dollar would lower Bharti’s interest costs by 20 basis points. and impact profit by 10 basis points,” the global brokerage said in a note to clients.
the size of Vodafone idea and trust jiodollar debt was not immediately available. However, analysts said Vi’s dollar debt is likely to be very modest as most of its Rs 1.96 lakh-crore net debt is deferred spectrum and AGR (adjusted gross income-related) liabilities to government. Vi dues to banks and financial institutions amounted to Rs 18,070 crore in the quarter ended March, FY22.
At the time of going to press, Airtel, Vi and Jio have not responded to ET’s questions.
However, analysts agree that operators will have to push a price hike in the next 6 to 12 months, even at the risk of losing some customers, amid rising input costs due to high inflation, in addition to the depreciation of the rupee drives up network capex outflows.
Telcos are in an unenviable position as the sharp depreciation of the rupee against the dollar will drive network capex and interest costs on dollar-linked debt, in turn prompting them to price prices later this year. increase, but they can only rise to a point to avoid churn and reduced usage,” said Mahesh Uppal director at telecom consultancy Com First India.
Analysts expect Airtel and Vi to report a sluggish fiscal first quarter, FY23, hit by heavy customer losses amid rising mobile service costs and fewer 4G user additions due to lower sales of expensive smartphones.
However, Jio is expected to expand its customer base in the first fiscal quarter and report strong sequential growth, continuing to benefit from last December’s rate hike as India’s top telco has a higher number of users with longer-term plans. validity period, unlike its two older rivals.