India's telecommunications industry is likely to witness its operating profit growing by a strong 12-14 per cent to Rs 1.55 lakh crore during the current fiscal year on the back of increasing data consumption and higher average revenue per user (ARPU), as per a report presented on Monday.
Crisil Ratings pointed out that solid operating performance, along with lower capex intensity post-5G rollout completion, will drive free cash flows and enable the credit profiles of top telcos.
Operating profit growth last fiscal had already touched 17 per cent largely on the back of tariff increases. In comparison, growth this year is likely to be driven by more fundamental reasons in the industry.
"ARPU is likely to increase to Rs 220-225 during this fiscal from Rs 205 during the previous fiscal, primarily due to increased data usage. Greater penetration of 5G network, with penetration likely to touch 45–47 per cent by March 2026 from 35 per cent as of March 2025, is driving data consumption for use cases like social media, video streaming, gaming, generative AI, and digital advertising," said Anand Kulkarni, Director at Crisil Ratings.
Data usage, he said, is also likely to grow to 31-32 GB this fiscal from 27 GB last year.
Indian telecom operators have also been rebalancing themselves by cutting low-data plans and restricting 5G offerings to higher-data plans, a move likely to drive more consumers into premium packs and further lift ARPU.
The surge in demand for data-intensive services has prompted telcos to offer premium plans packaged with over-the-top (OTT) services, where the company can boost ARPU through upselling.
Furthermore, internet penetration in rural and semi-urban regions is expected to grow by 4-5 per cent at 82 per cent by fiscal 2026. Migrations from voice-only plans to data plans will also drive ARPU.
With approximately 60 per cent of telecom expenses fixed, any rise in ARPU is proportionate to a rise in operating profits. The report states that an increase in ARPU by Rs 1 adds Rs 850-950 crore to the industry's operating profit.
"Capex intensity, at an average of 31 per cent in the last two fiscals, is likely to slow down to 24-26 per cent this fiscal as most of the 5G network deployment has been done by the top telcos. Besides, bulk of the spectrum buying has been done in fiscal 2023 and the next major spectrum renewal will be due only in 2030," said Nitin Bansal, Associate Director, Crisil Ratings.
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