IGI Logo

Crisil Ratings in its latest report has said that a much-needed tariff hike and growing data consumption will lift the average revenue per user per month (ARPU) of Indian telecom companies (telcos) by around 25% in fiscal 2026 compared with fiscal 2024. The industry ARPU should dial up to a decadal high of Rs 225-230 by end of next fiscal (FY26) compared with Rs 182 last fiscal. That, along with moderation in capital expenditure (capex), on account of lower network investments after completion of 5G rollouts and limited spectrum renewals, will enhance return on capital employed (RoCE) and support deleveraging in the industry, thereby improving credit profiles. 

According to the report, the ARPU growth will be gradual over this fiscal and the next as the tariff hike becomes effective on the next recharge cycle for long-duration plans. It will improve operating profitability, which shall lift the industry RoCE to around 11% next fiscal from around 7.5% in fiscal 2024. The industry has seen a long period of supressed RoCEs, due to substantial investments made towards the rollout of each generation of technology and the associated spectrum liabilities. Capex intensity averaged at around 28% over the past three fiscals and is expected to come down to around 19% by next fiscal as most players have completed their 5G rollouts. While network capex for fiberisation of telecom towers, setting up of base transceiver stations and small cells for augmentation of networks is expected to continue, it will be at a slower pace. 

Similarly, the report said new spectrum capex is also likely to reduce as most of the spectrum purchase was completed in fiscal 20236 and next significant spectrum renewal will be due in 2030. This was visible in the recent auction held in June 2024 which saw bids for only Rs 11,341 crore, or around 12% of the total airwaves on offer. Nearly half of the amount spent was on spectrum renewals. It estimates do not factor in any further tariff hikes by telcos and any such move may provide an upside. In the road ahead, the ability of the industry to maintain its competitive landscape and higher-than-expected network capex by telcos will be monitorable.