The Credit rating agency ICRA has revised the outlook for India’s telecom tower industry from ‘Negative’ to ‘Stable’. This comes after a steady improvement in payments from telecom companies, which has helped reduce delays in receiving dues.
Earlier, the industry was facing problems due to delayed payments by some telecom operators. This caused cash flow issues for tower companies. Now, timely payments and clearance of old dues have brought relief.
Reduced debtor days ease working capital pressure: ICRA
ICRA noted that timely payments from major customers and clearance of past dues have shortened the industry’s receivables cycle to around 45-60 days, well below the earlier concern threshold of 80 days. This improvement has strengthened the cash flows and liquidity for tower companies, reducing their dependence on external debt.
According to Ankit Jain, Vice President and Sector Head, Corporate Ratings, ICRA Ltd, “Improvement in the credit profile of some key telecom service providers has eased the working capital cycle of tower companies. Clearance of sizable past overdues has also boosted cash flows and liquidity for the industry as a whole.” He added that collections are expected to remain timely, keeping debtor days below 60 days going forward.
Capex plans and 5G rollout to drive growth
With some telecom customers improving their credit profiles and completing fundraising exercises, capex plans are set to revive. The growing demand for telecom data services in India is pushing network expansion and upgrades, supporting increased tenancy on towers.
Jain said, “Technology upgrade to 5G and revived capex plans of some customers bring a favourable demand outlook for tower companies.” He expects annual capex in the range of Rs. 10,000-11,000 crore for the industry in FY2026. This investment is likely to increase tenancies, helping arrest the decline in tenancy ratios, which are projected to stabilize around 1.35-1.40x.
Income growth of 4-6% for the telecom tower sector by FY2026: ICRA
ICRA forecasts operating income growth of 4-6% for the telecom tower sector by FY2026. Operating margins (excluding energy revenues) are expected to hold steady at 70-75%. The easing of working capital needs and improved collections should boost cash balances to Rs. 5,500-6,000 crores, up from Rs. 2,200-3,000 crores previously.
With growing tenancies and healthier cash flows, the return on capital employed is projected to improve significantly to around 13-15% by FY2026, compared to just 6-7% in FY2023.