New Delhi, Aug 18 The operating profit of India’s telecom companies is projected to grow at a strong rate of 12-14 per cent to Rs 1.55 lakh crore this fiscal, driven by surging data consumption and a consequent increase in the average revenue per user (ARPU), a report said on Monday.
The robust operating performance, along with declining capital expenditure (capex) intensity of leading players after completion of 5G rollout, will improve their free cash flow. This will support credit profiles of leading players in the industry, Crisil Ratings said in its report.
Last fiscal, the operating profit growth stood at 17 per cent, and it was predominantly lifted due to tariff hikes. This fiscal, growth will be supported by strong intrinsic factors, the report stated, the report stated.
"ARPU is expected to climb to Rs 220-225 this fiscal from Rs 205 last fiscal, largely on account of rising data consumption. Wider availability of 5G network, with penetration expected to touch 45–47 per cent by March 2026 from 35 as of March 2025, is fuelling data consumption for applications such as social media, video streaming, gaming, generative artificial intelligence and digital marketing," said Anand Kulkarni, Director, Crisil Ratings.
Consequently, data usage is expected to increase to 31-32 GB in the current fiscal from 27 GB last fiscal, he added.
Additionally, the Indian telcos have been rebalancing their offerings by reducing plans with low data limits or offering 5G services only on plans offering higher data limits.
This trend is expected to move consumers to premium plans, boosting telco ARPU, Kulkarni added.
Amid the rising demand for data-driven services, telcos have introduced premium plans that bundle over-the-top (OTT) services, and this strategy is helping telcos in raising their ARPU through upselling.
Moreover, internet penetration in rural and semi-urban areas is expected to increase by 4-5 per cent, rising to 82 per cent by fiscal 2026, the report stated.
The users transiting from voice-only plans to data plans will further lift the ARPU.
An increase in ARPU results in a surge in operating profit, given that 60 per cent of the overall cost of telcos is fixed in nature.
Thus, the telecom industry benefits from high operating leverage, and every Rs 1 increase in ARPU adds Rs 850 - 950 crore to the industry's operating profit, the report said.
“Capex intensity, which averaged 31 per cent over the past two fiscals, is expected to moderate to 24-26 per cent this fiscal as a large part of 5G network rollout has been completed by the leading telcos. Furthermore, most of the spectrum purchase was completed in fiscal 2023, and the next significant spectrum renewal will be due in 2030," said Nitin Bansal, Associate Director, Crisil Ratings.
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