The fundamentals of country's telecom sector remain strong and growth drivers like increase in broadband penetration, government's fiberisation push, low ARPUs and upcoming 5G wave underscore untapped potential in the market, according to Deloitte India.
However, huge debt on the balance sheet of telcos continues to be an overhang, and the financial position of industry must improve for investors to make the most of the upside, Sathish Gopalaiah, Partner, Deloitte India said.
"No doubt that there is a significant interest from investors in the sector. If you look at the fundamentals, the internet penetration globally and in India, and headroom for growth, the cost of data per GB here being lowest in the world, need for home and enterprise connectivity, the huge push by government on Digital India and fiberisation...the only way these things will move from here is going up...it has to improve and increase," Gopalaiah told PTI.
Once 5G comes in, connected cars, factories, and other use cases will fuel growth, and all these growth drivers underscore the tremendous market potential which is currently untapped.
The Average Revenue Per User (ARPU) levels are still "quite low" when compared to the rest of the world and expected to rise to above Rs 220 in 6-8 quarters from the current range of Rs 120-150, he said.
"Given the competitive landscape, affordability issues, state of the economy and many other factors, it is not a good time to raise tariffs. But tariff increase will happen when the economy bounces back, and I think it is a matter of time," he said.
While investor interest has flared up in the sector, the debt on balance sheet of some operators remains a concern.
"Investors are coming in because they see potential, but operators have debt on balance sheet and are struggling to survive...while there are upsides, debts on balance sheet is also significant, so that has to improve over a period of time," he said.
Fund raising will continue in various forms across ecosystem, including start-ups, and not limited to telecom operators, Gopalaiah said.