ICRA improves outlook for Indian telecom tower industry to stable

In India, the credit rating agency ICRA has made a significant revision to the outlook for the telecom tower industry, changing it from 'Negative' to 'Stable'. This positive shift is attributed to a series of timely payments received from telecom service providers and the clearance of previous dues, which had significantly impacted liquidity and operational efficiency for tower companies. The sector previously experienced financial strain due to delayed payments, leading to elongated receivable cycles and increased liquidity challenges. However, recent developments indicate a notable improvement in these payment cycles. ICRA has highlighted that the average receivable days have now decreased to approximately 45-60 days, comfortably below the 80-day threshold that would necessitate a negative outlook. This improvement in collection cycles has alleviated liquidity stress within the sector and diminished the reliance on external debt. Furthermore, as telecom service providers enhance their credit profiles, the overall working capital cycle for tower companies has improved, providing a more favorable financial backdrop for the industry. Looking ahead, ICRA has projected a growth rate of 4-6 percent in operating income for the industry by the fiscal year 2026. This projection is accompanied by expectations that operating margins will remain robust, particularly in light of anticipated margins of 70-75 percent, excluding any energy revenues generated. Additionally, cash reserves within the industry are expected to surge to between Rs 5,500 crore and Rs 6,000 crore, more than double the previous estimates of Rs 2,200 crore to Rs 3,000 crore. This rise is attributed to improved working capital management practices and a decline in provisioning costs. As telecom companies improve their financial health, many are likely to resume capital expenditure initiatives to meet the growing demand for data services in India. With the continuous demand for upgraded network services, this renewed focus on capital expenditure signifies a critical turning point for the industry, paving the way for enhanced financial stability and sustained growth in the years to come. The report concludes that this turnaround marks a positive trajectory for the Indian telecom tower sector, fostering a more resilient operational environment and supporting future developments.