New Delhi

According to Crisil Ratings, the recent tariff increases and rising data usage are expected to boost the average revenue per user (ARPU) for Indian telecom companies. They estimate that ARPU will rise by 25% in the fiscal year 2025-26 compared to 2023-24.

This increase, along with a slowdown in capital expenditures due to fewer investments needed after the 5G rollout and limited spectrum renewals, is likely to improve the return on capital employed (RoCE) and strengthen credit profiles for these companies.

Revenue growth is expected to be gradual over the current and next fiscal years, as the tariff hikes will take effect with the next recharge cycle for long-term plans. This will enhance operating profitability and raise industry RoCE to 11% in the next fiscal year, up from 7.5% in 2023-24.

Crisil noted that the telecom sector has experienced low RoCE for a long time due to heavy investments in rolling out new technologies and managing spectrum liabilities. The average ARPU is projected to reach a decade-high of ₹225-230 by the end of the next fiscal year, up from ₹182 last year.

This growth will stem from recent tariff hikes and increased data consumption, driven by higher usage of video streaming, social media, and online gaming. Although capital expenditure for network improvements will continue, it is expected to proceed at a slower pace, with reduced spending on new spectrum as most purchases were completed in 2023, with significant renewals not due until 2030.