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Telecom sector outlook negative on AGR dues: ICRA

The debt has consistently remained high owing to reduction in organic cash flow generation and consistently high capex requirements.



Mobile tower

New Delhi, Dec 12 : Rating agency ICRA has maintained a negative outlook for the Indian telecom industry, which is grappling with AGR dues, notwithstanding the green-shoots of recovery.

The telecom industry woes, according to ICRA, continue as the industry is required to pay a substantial amount to the Department of Telecom in the form of retrospective AGR related dues.

These amounts, as per the Supreme Court order dated October 24, 2019, are sizeable (including the interest and penalties) and in the event of an outflow towards these payments, it will create additional pressure on the balance sheet of the telecom operators, depending on the funding mix.

This comes at a time when the industry’s health w as on the recovery track, on the back of deleveraging initiatives, moderation in capex intensity and restoration of pricing power.

The sector has passed through a phase of turbulence during the last few years, with intense competition and pricing pressures leading to a decline in revenues and profitability.

Consistent downward revision in prices resulted in one of the steepest falls in the industry average revenue per user (ARPU) levels with the estimated blended ARPU falling from Rs. 169 in Q1 FY2017 to Rs. 124 in Q1 FY2020; the industry adjusted gross revenue (AGR) fell from Rs. 44,570 crore to Rs. 28,650 crore in the same period.

The overall high operating leverage of the industry meant that the decline in revenues percolated to pressure on profitability and cash flows.

Further, the industry is saddled with elevated debt levels and consistently high capital expenditure (capex) requirements.

The debt has consistently remained high owing to reduction in organic cash flow generation and consistently high capex requirements.

As per ICRA estimates, the debt as on March 31, 2019 stood at Rs. 5 lakh crore. The private telecom operators undertook deleveraging measures during FY2020, which included rights issue by Bharti Airtel and Vodafone Idea, IPO of the African operations by Airtel and hiving off of the tower and fibre assets by RJio.

While these have been concluded, o ther plans like further equity infusion by Airtel, monetisation of stake in tower companies and fibre assets are on the anvil for some operators.

These are expected to result in decline in debt as on March 31, 2020 to around Rs. 4.4 lakh crore (without taking any incremental debt due to AGR issue).

This financial year also witnessed steady improvement in ARPU levels drive n by weaning of low ARPU subscribers with the introduction of minimum recharge plans. Further, the telecom operators announced a steep tariff hike, first of its kind in a long time, to the tune of 35-40%, which will manifest into improvement in ARPU levels and healthy improvement in organic cash flow generation.

Since the subscriber base has largely saturated, the key drivers for growth in the telecom sector would be: a) pricing improvement, and b) identifying and implementing new use cases for the telecom services. The latter is a longer-term goal and would require more investments and thus, in the immediate term, it is the push for higher realisation which is achievable and has been attempted.

However, despite the debt reduction and EBITDA improvement attempts, the coverage indicators are expected to continue to remain weak, with estimated d ebt/EBITDA likely to be more than 7x and interest coverage less than 2x as o n March 31, 2020.

The impact of tariff hikes will be visible in FY2021, when the EBITDA is expected to improve by 21% over FY2020 levels. This, along with reduction in debt levels, is expected to result in estimated debt/EBITDA of around 5x and interest coverage of 2.5x as of March 31, 2021.

Amid these attempts by the telecom operators to reduce their debt levels, the SC order on October 24, 2019 pertaining to the definition of AGR and inclusion of some non-core revenues while calculating the AGR from retrospective basis has added to the woes of the industry.

The telecom operators are required to pay a revenue share to the DoT in th e form of license fee and spectrum usage charges which are derived from the AGR.

The SC ruling mandated the operators to include some components of revenues like dividend income, rental income, forex gains, etc while computing AGR on a retrospective basis, which along with interest and penalties on the s ame resulted in sizeable dues for the operators, ICRA said.

In case these have to be funded through debt, it has the potential to derail the deleveraging attempts by the industry.

However, clarity is awaited on the final amounts and the payout timelines as the operators have filed a re view petition with the SC.

The government has announced deferral of spectrum auction instalment payments for FY2021 and FY2022, providing a minor financial succour to the industry.

During FY2019, the industry incurred a capex of more than Rs. 1 lakh crore and the capex intensity, as measured by the capex/sales ratio has been significantly higher over 50% compared to international standards of 17-18%, especially in the last few years.

However, with the telecom industry achieving a sizeable penetration for 4G, the peak capex cycle for Indian telcos is over and thus the capex intensity is expected to witness moderation till the tim e there is a technology upgrade to 5G.

The capital expenditure incurred by the telecom operators has remained high on account of expansion and upgradation of network towards 4G, amid increasing data requirements, changes in technology and spectrum acquisition. The moderation in the capex intensity is expected to improve the cash flow position, going forward.

Among other sources of revenues, ICRA believes greater proliferation is expected in the home broadband and Direct-to-Home (DTH) services.

While these services have been provided by many telecom players for many years, a new entrant with plans for widespread penetration, is likely to provide greater fillip to these segments.

Another emerging trend is greater focus on content by the telecom operators to increase customer stickiness. These developments would mean greater convergence of various means of mobility and entertainment, with telecom networks serving as the foundation.

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Vodafone Idea should either recapitalize or go to IBC: Rajeev Chandrasekhar




Vodafone, Idea

New Delhi, Feb 15 : Rajya Sabha MP Rajeev Chandrasekhar said on Saturday that Vodafone Idea should either recapitalize or follow the Insolvency and Bankruptcy Code (INC).

“The solution is straight forward — Vodafone-Idea either recapitalizes or follows Insolvency and Bankruptcy Code resolution with creditors and looks for new investors like other bankruptcies, Chandrashekhar said while commenting on the Supreme Court hearing on the adjusted gross revenue (AGR) of telecom operators.

“After Insolvency and Bankruptcy Code law has been implemented by the Modi government, the only path for companies and creditors is resolution/insolvency,” said Chandrasekhar who is also a member of the Joint Parliamentary Committee which is looking into the Personal Data Protection Bill, 2019.

The Supreme Court on Friday came down heavily on both telecom companies and the telecom department (DoT) over non-payment of AGR dues amounting to Rs 1.47 lakh crore.

Commenting on the SC ruling, former telecom entrepreneur and Rajya Sabha MP Rajeev Chandrasekhar said, “I agree telecom sector has made things difficult…But a solution has to be proper and not knee-jerk.”

Commenting on Vodafone Idea , Rajeev Chandrasekhar said: “Vodafone Idea is very valuable company — with assets, spectrum, and customers. Creditors must be pro-active and ensure it is a going concern, and then look at promoter’s interests. Vodafone Idea if referred to Insolvency and Bankruptcy Code can be solved with minimum prejudice to creditors”.

“Telcos have very little basis to argue against AGR ruling. It is a decades old and substantive dispute that they have kept kicking down the road. Now that the Supreme Court has ruled, there is no way of avoiding it,” he said.

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Galaxy S20 consumes 600MB per minute while recording 8K videos




Samsung Galaxy S20

San Francisco, Feb 15: South Korean tech giant Samsung has revealed that recording 8K footages on the recently launched Galaxy S20 smartphone would occupy about a considerable 600MB per minute.

According to the company a five-minute-long recorded video in 8K would consume nearly 3GB of the onboard storage space, The Verge reported recently.

The smartphone is available with up to 512GB of internal memory and supports up to 1TB microSD cards, a maximum total combined storage of 1.5TB.

Additionally, as per report, the maximum recording time is restricted to just five minutes and videos can be recorded at only 24fps (frames per second), which means, one can not shoot at higher rates such as 30fps or 60fps.

For comparison, a Galaxy S10 Plus recording 4K video consumes a maximum of 350MB/s per minute.

S20 and S20+ have a triple camera system at the rear with main 64MP camera and a 10MP selfie shooter while S20 Ultra has main 108MP camera and 40MP front camera.

The S20 Ultra takes things a step further with the option to shift dynamically between a high resolution 108MP mode and a 12MP mode, thanks to “nona-binning” technology which combines nine pixels into one at the sensor level.

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Alleged Google Pixel 5 XL image leaks with unique camera setup




Google Pixel 5 XL

San Francisco, Feb 15: It may have been just a few months since Google launched its Pixel 4 smartphones, but a new image has leaked that shows the purported Pixel 5 XL with a unique-looking design language.

The phone is reported to keep the same texture finished on both the frames and the rear glass, both matte/soft touch. It would be a good idea to go with such a design since Apple and Samsung (Google’s biggest competitors) have square/rectangular camera setups, GSMArena reported on Saturday quoting Front Page Tech.

However, the leaked image is one of three prototype renders, thus, meaning that the render we are seeing may not see the light of the day as the Google Pixel 5 smartphone.

The YouTuber showed the back of the Pixel 5 in his leak.

It looks monstrous, yes, but it ultimately won’t matter what Google does with the camera module as long as the Pixel 5 takes better photos than ever, according to BGR.

Earlier in October, Google announced the newly-launched Pixel 4 and Pixel 4 XL smartphones will not be available in India.

In a statement, the company said it has decided not to make Pixel 4 duo available in the country.

The Google Pixel 4 has a radar sensor, dubbed Project Soli during development, and now called Motion Sense.

This allows the smartphone to support air gestures – so you can wave your hands at your phone to execute certain actions. This works on 60GHz spectrum and that was said to be the reason why the company didn’t launch the phones in India.

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