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G. Rambabu

NEW DELHI, Sept. 13

THE cumulative capex of Indian telecom operators to date, both private and public, is estimated to be Rs 1,30,000 crore ($26.8 billion), with the bulk of it by telecom behemoths Videsh Sanchar Nigam Ltd (VSNL), Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), according to the latest sector-wise report by ICICI Securities.

Based on the rollout strategies and forecast of subscriber growth numbers, the report estimates telecom capex to be around Rs 47,840 crore ($9.2 billion) over the next three years. Bulk of this is again expected from the PSU companies, with wireline operators accounting for Rs 30,200 crore, limited mobility WLL Rs 12,700 crore, backbone infrastructure Rs 9,800 crore and cellular operators Rs 5,000 crore.

It further adds that the growth paradigm in the telecom space would require capex of about $15-16 billion over the next five years and an additional $2.5-3 billion by subscribers on handsets. With most domestic infrastructure lenders already having a 3-5 per cent exposure in their loan portfolios to telecom and equity financing becoming extremely selective, access to capital however could emerge a significant entry barrier.

"With banks and financial institutions adopting more conservative and prudent appraisal, credit exposure methodologies, high levels of gearing would be difficult to come by. In the circumstances, the incumbents hold an edge, given their low gearing and free cash flow status. On the other hand, most private operators would have to lean heavily towards overseas equity funding either from strategic or venture capital investors," it states.

It notes that despite the strong growth attractiveness that the country offers in the face of the recent global telecom meltdown, such support is likely to be selective. Clearly a hike in foreign ownership limit from the present 49 per cent to 74 per cent would provide a significant fillip to attract more FDI. Pending that mergers and acquisitions would continue to offer recourse for smaller players to attain critical mass.

As regards the growth of the telecom market, the report estimates it to grow to Rs 48,300 crore by 2005 and further to Rs 69,900 crore by 2007. That implies that the total telecom market would expand from 1.46 per cent of GDP to 1.7 per cent by 2007, it states.

The share of the GSM cellular services is expected to grow by 28.2 per cent during this period, and its market share to increase to 21.2 per cent from 10.5 per cent at present. Limited mobility services will capture 4.5 per cent of the market space, with a growth of 107.5 per cent.

Fixed line services would continue to be the largest segment contributing 48 per cent to the pie compared to 35.3 per cent now.

However, the share of long distance (both national and international) is expected to fall to 21.2 per cent from 52.5 per cent at present, the report estimates.

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Telecom operators' capex put at Rs 1,30,000 cr

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