Telecom Revenue to Grow 12-14% in FY27 as ARPU Rises 10%: CareEdge Ratings
CareEdge Ratings expects another tariff hike in India’s telecom, alongside continued premiumisation, to support 10% ARPU growth and 12-14% revenue growth in FY27, even as subscriber additions remain moderate.
According to CareEdge Ratings, India's telecom market continues to exhibit one of the widest gaps between data consumption and monetisation. Despite having among the world’s highest mobile data usage levels, mobile ARPU remains at only US$2.5, highlighting significant headroom for further tariff rationalisation. With nearly two years having elapsed since the last industry-wide tariff hike, another calibrated increase appears likely in FY27.
The completion of the peak 5G investment cycle should drive a structural improvement in the sector’s financial profile. CareEdge Ratings expects EBITDA margins to improve from 55% in FY26 to 57% in FY27, while capex intensity is estimated to moderate to 19% from 22%. Together, these factors should support stronger free cash flow generation and deleveraging, with net debt-to-EBITDA declining from 3.0x in FY26 to 2.3x in FY27.
Maulesh Desai, Director, CareEdge Ratings said, “India's telecom sector has entered a fundamentally different growth phase, with earnings increasingly driven by ARPU-led monetisation of the existing subscriber base rather than subscriber additions. The continued rise in ARPU, despite no tariff hike since July 2024, highlights the strength of ongoing premiumisation, 2G-to-4G/5G migration, rising smartphone penetration, and improving subscriber quality. Notably, India's monthly data consumption of 26.7 GB per user is among the highest globally, while its ARPU of US$2.5 remains significantly lower than that of other major telecom markets. This combination underscores significant headroom for further tariff rationalisation, making another calibrated tariff hike in FY27 a key catalyst for the next phase of growth.”
As India's wireless market approaches maturity, telecom subscriber growth is moderating to 3-4% per annum, reducing the contribution of subscriber additions to industry growth and shifting the focus towards ARPU-led monetisation of the existing subscriber base.
Despite no industry-wide tariff hike since July 2024, ARPU growth has remained resilient, reflecting a structural shift in the sector's growth drivers. Industry ARPU has increased at a CAGR of 11% from Rs 142 in FY23 to Rs 196 in FY26, implying that revenue growth is no longer solely dependent on periodic tariff hikes.
ARPU expansion is being driven by ongoing 2G-to-4G/5G migration, premiumisation, rising smartphone penetration, higher data consumption, and improved subscriber quality. Average mobile data usage in March 2026 reached 26.7 GB per user per month, while the Visitor Location Register (VLR) ratio has improved to 93.7% in June 2026, from 92.85% in March 2025, indicating a higher proportion of active subscribers.
Prasanna Krishnan, Associate Director, CareEdge Ratings said, “The sector is also moving beyond its peak investment cycle following the nationwide 5G rollout. As capex intensity moderates from 22% in FY26 to 19% of revenue in FY27, improving operating leverage is expected to lift EBITDA margins from 55% to 57% in FY27, thereby strengthening cash generation and accelerating deleveraging. Consequently, Net Debt/EBITDA is projected to improve to 2.3x in FY27 from 3.0x in FY26, reinforcing the sector's improving financial and credit profile through FY27.”
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