Strong signal: Telcos’ AGR rises in Q2 after falling for 5 straight quarters

By: | Updated: December 29, 2017 5:06 AM

The government-appointed inter-ministerial group’s (IMG) view of “some green shoots” emerging in the telecom industry, which for the past year has witnessed its revenues and profits plunge on account of intense competition, seems to be finally coming true.

Telcos, AGR, Telcos AGR, adjusted gross revenue, straight quartersThe government-appointed inter-ministerial group’s (IMG) view of “some green shoots” emerging in the telecom industry, which for the past year has witnessed its revenues and profits plunge on account of intense competition, seems to be finally coming true

The government-appointed inter-ministerial group’s (IMG) view of “some green shoots” emerging in the telecom industry, which for the past year has witnessed its revenues and profits plunge on account of intense competition, seems to be finally coming true, as the adjusted gross revenue (AGR) for the sector rose for the first time during the second quarter of FY18 after clocking five consecutive quarters of decline. The industry’s AGR during the July-September quarter of FY18 rose by 5% to Rs 41,669 crore. The uptick comes after five back-to-back quarters of fall, the latest Trai data show. The industry’s AGR stood at Rs 39,778 crore during Q1FY18, Rs 40,839 crore in Q4FY17,  Rs 45,905 crore in Q3FY17, Rs 50,539 crore during Q2FY17 and Rs 53,383 crore in Q1FY17. Gross revenues too rose by a little over 2% to Rs 66,362 crore during Q2FY18, compared with Rs 64,889 crore in Q1FY18. It is the second consecutive quarter that revenues rose. Gross revenue from the industry, too, were on a northward trajectory during 2016-17. The development is likely to be a positive one for the government as it was anticipated that revenues from the sector would come down during the current fiscal on account of falling AGR. The government collects revenues from telecom operators in the form of spectrum usage charge (SUC), licence fee (LF) and contribution to the Universal Service Obligation Fund (USOF), which are charged according to a fixed percentage of the AGR.

A senior government official said if the upward trajectory of GR and AGR continues, apprehensions of the Department of Telecom (DoT), industry and bankers about revenue from the sector declining in FY18 may evaporate. In June, DoT had told the finance ministry that it expects revenues from the sector to fall by 38% in FY18 on account of “severe financial stress” and “rapid decline in earnings” of the operators. It had asked the ministry to revise its non-tax revenue target for the department steeply downwards to Rs 29,524 crore for the fiscal from the earlier estimated Rs 47,304 crore, sources said. Earlier this month, the Indian Banks Association (IBA) also urged the government to refund excess upfront payment and revoke deferred liabilities of operators undergoing financial restructuring as the industry continues to experience “severe stress”. According to the IBA, total liabilities of the telcos stood at around Rs 7.75 lakh crore as on March 31, 2017. Of this, bank borrowings and liabilities for spectrum-related payments to DoT alone amounted to Rs 5.80 lakh crore. But the development is also a shot in the arm for the IMG, which was set up to suggest measures to help bail out cash-strapped operators. It had recommended increasing the repayment period for deferred spectrum liabilities from 10 to 16 years. The panel had noted that there is a need to watch the sector for a couple of quarters before suggesting more measures as there were “some green shoots” visible. Given the uptick, market analysts contended that it reflects the rise in blended average revenue per user (ARPU) from the sector as Jio started charging its subscribers from April 1, 2017. Sector ARPUs, which stood at Rs 83 during Q4FY17, declined 4% to Rs 80 in Q1FY18, but rose 5% to Rs 84 during Q2FY18. Jio offered free voice and data to its subscribers during Q3FY17 and Q4FY17.

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