Indian telecom sector had a huge success on voice and now at the cusp of data revolution which is destined to become the foundation for “Digital India”. But the sector is also marred by controversies that operators are not investing enough in networks – leading to poor quality of services and call drops. The investments can come from surplus cash generated from operations or from external infusions in terms of debt and equity. Both are linked to the sector’s ability to manage unproductive/unnecessary outflows, as profitability dependent upon it. This note attempts to investigate the challenges in generating surplus cash due to huge outflow committed in terms of the license and auction fees.
The Cash Flow Equation
The table under is a snapshot of the telecom industry’s cash flows (past and future) due to revenues from wireless services and outflows on spectrum and license fees. The other contributing factors such as incremental Capex, Opex etc are not included.
