Telecom sector profit expected to fall by 85%

Reeling under the pressure of borrowings for 3G services, the profit of telecom sector is likely to dip by 84.7% in 2011-12, Economic Survey today said.

"PAT (Profit After Tax) during 2011-12 is expected to fall by 84.7%, mainly on account of the sharp rise in the industry's interest outgo and higher depreciation charges due to the heavy borrowings for acquiring 3G licences and rolling out 3G services," the survey said.

The pre-Budget document said it expects sales of telecom industry to slow down in 2011-12 to 8.7% from 10.5% during 2010-11. However, it expects the revenues to gain momentum in 2012-13 with a growth rate of 10.6%.

The survey estimates that profit margin of IT sector also to remain under pressure inspite of healthy growth in topline.

For the year ending March 2012, the Indian IT industry's sales are expected to grow by 20.5% and another 18.5% during 2012-13, driven mainly by an increase in orders.

Profit after tax (PAT) is expected to grow by 13.1% in 2011-12 and 14.2% in 2012-13, the survey said.

While software services exports have continued to be steady, the unfolding events in the euro zone could lead to some sluggishness in the sector, it added.

The survey said that these two services sectors ,software and telecom, can be a high growth propelling force for many more years to come with positive spillovers to other sectors and can give a cutting edge in these sectors while facing international competition.