Rupee depreciation may raise cost of imported telecom gear, push up capital expenditure: Report

Depreciation in Indian rupee and African currencies against the US dollar may raise the cost of imported telecom equipments, including for Bharti, pushing up the capital expenditure, according to a report by Axis Capital.

The report said while telcos' capex has been hit globally due to COVID-19 lockdown, growth of telecom infrastructure providers will be hurt by slowdown in government spending on projects like BharatNet.

"Depreciation in INR/African currencies versus USD may increase cost of imported telecom equipment (including Bharti), pushing up their capex. Stronger USD may also lead to translation losses from USD-denominated debt," Axis Capital's telecom sector report said.

Benefit of lower crude oil price would be passed to consumers once lockdown is over, but if crude sustains at these levels for longer, it will hurt earnings of African economies, affecting Airtel Africa's growth, it added.

On challenges for infrastructure providers, the report said that delays in BharatNet project and 5G spectrum auction may impact Sterlite Tech and Tejas Networks, while Bharti Infratel faces concerns around financial stress of Vodafone Idea and competition from Jio Infratel.

On Bharti Airtel, it said usage per subscriber is insulated from COVID-19 impact, though subscriber addition will be hit by the lockdown.

"Rupee depreciation is likely to push up capex spends and translation losses," it said.

In an unprecedented move, Prime Minister Narendra Modi on March 24 announced a complete lockdown of the entire country for 21 days to try halt the spread of coronavirus, shortly after which the Centre said road, rail and air services will remain suspended during this period.

As on early Sunday, the pandemic had claimed 77 lives in the country, and the number of COVID-19 cases had increased to 3,374 in India.

While the lockdown has meant that new subscriber additions for March have taken a massive hit as stores remained shut for days, telecom operators have put their might behind ensuring that essential connectivity services inthe country continue uninterrupted to enable customers to connect to their loved ones and work from home.