In Short:
Indian telecom operators have hiked tariffs by 17-19% and data usage is increasing with 5G. This will raise industry ARPU to Rs 225-230 in fiscal 2026. Telcos are expected to see a 25% increase in ARPU by 2026. The industry’s RoCE is expected to improve to 11% next fiscal. Debt reduction will improve credit profiles. Customers are upgrading plans due to increased content consumption.
Indian Telecom Operators to Witness a Boost in Average Revenue per User by 2026: CRISIL Ratings
The recent tariff hikes by Indian telecom operators, along with the growth in data usage due to increasing 5G penetration, are expected to increase the industry average revenue per user (ARPU) to a decade-high of Rs 225-230 by fiscal 2026, compared to Rs 182 in fiscal 2024, as per a research note by CRISIL Ratings.
Impact of Tariff Hikes
CRISIL Ratings stated that the industry ARPU is projected to rise by approximately 25% in fiscal 2026 compared to fiscal 2024, driven by the tariff hikes and increased data consumption. This move is expected to improve the credit profiles of telecom companies.
Future Projections
The moderation in capital expenditure (capex) post the rollout of 5G networks and limited spectrum renewals is anticipated to enhance the return on capital employed (RoCE) and support deleveraging in the industry. This, in turn, will lead to improved credit profiles.
Regulatory Response
In response to the tariff hikes, the move has faced criticism from various quarters, including the opposition government, employees union of BSNL, and the Bharatiya Mazdoor Sangh. The industry had previously raised mobile tariffs in November 2021.
Industry Debt and Outlook
CRISIL expects the industry to witness a gradual growth in ARPU over the next few years, leading to improved operating profitability and a rise in industry RoCE. The reduction in capex intensity and debt reduction are also on the cards, which will help improve credit risk profiles.
Overall, the telecom industry is poised for positive growth, with a focus on enhancing profitability and reducing debt burden in the coming years.
