Telecom’s percentage of total CapEx could increase 

The telecom and digital sector saw the largest increase in its share of total industry expenditure over the past five years, rising from 9% in FY13–17 to 17% in FY18–22. In the following five years, as the roll-out of 5G services picks up speed, its part of the CAPEX pie is projected to grow much more.

The capital expenditures of telecom businesses increased about 2.5 times to Rs 3.45 trillion in FY18–22 compared to Rs 1.44 trillion over the previous five years, according to a Centrum Broking analysis that examined data from over 150 companies across sectors. Between FY18 and FY22, it elevated the telecom and digital industry to the position of a second-largest contributor to CAPEX, only behind oil & gas (the oil & gas CAPEX was Rs 6.29 trillion). It ranked below oil & gas, auto, metals & mining, and utilities in the fiscal years 2013 to 2017.

The study examined a number of industries, including telecom, information technology, fast-moving consumer goods (FMCG), auto, consumer durables, oil and gas, utilities, infrastructure, chemicals, metals and mining, logistics, pharmaceuticals, retail, sugar, cement. In the last five years, the 150 enterprises’ cumulative CAPEX increased from Rs 16 trillion in FY13–17 to Rs 20.3 trillion.

Three private telcos, Reliance Jio, Bharti Airtel, and Vodafone Idea, made significant expenditures to bring out 4G services across the nation starting at the end of 2017; this increased the sector’s role in CAPEX. Only in FY22 did 4G cycle spending start to decline significantly after these companies had 4G coverage in over 95% of the nation.

The majority of telecom CAPEX during the reviewed period was accounted for by Reliance Jio. Unlike other providers, it invested Rs 2 trillion in building a brand-new network from start. And the amount will be considerably larger if the sum spent for the spectrum is added.

Analysts currently anticipate that the telecom and digital sectors’ share will increase over the coming years as telecom companies get ready to make substantial expenditures to roll out 5G services, which, by some estimates, may cost Rs 2-2.25 trillion only to set up the network. By March 2024, 5G services are expected to be available over at least 75% of the nation, according to Airtel and Jio.

Additionally, telecom companies purchased 5G spectrum in a previous auction for more than Rs 1.5 trillion, which they must pay in 20-year instalments (part of the amount will be paid in the next five years). For instance, sources claim that Jio will invest Rs 2 trillion in 5G (including spectrum fees), of which Rs 1.2 trillion will go toward network deployment alone.

On the other hand, numerous industries have seen a reduction in their percentage of total CAPEX during the past five years. Prior to the Covid pandemic, the auto industry was already experiencing a slump in demand; as a result, the auto sector’s proportion of overall capex fell from 10% in FY13–17 to 7% in FY18–22.