The Indian telecom sector is projected to witness a robust 12-14% growth in its operating income during the current fiscal year, reaching ₹3.5-₹3.7 lakh crore. This surge is primarily attributed to the tariff hikes implemented in July 2024, which are now translating into a healthier average revenue per user (ARPU) for telecom operators.
According to a recent report by ICRA, these tariff increases have significantly boosted the industry’s financial performance. The average revenue per user (ARPU), a key metric for telecom companies, is projected to have climbed to ₹200 in FY25, a notable increase from ₹184 in the previous fiscal year. ICRA anticipates a further rise in ARPU to ₹220 by the end of FY26, driven by an expected additional round of tariff hikes.
The ratings agency also highlighted that the steady growth in 4G and 5G subscribers, coupled with increased data consumption, has contributed to a rise in the industry’s adjusted gross revenue (AGR) over the past few quarters. The industry AGR improved to approximately ₹65,673 crore in the December quarter, marking an 11% year-on-year growth. However, ICRA notes that the primary driver of this AGR growth remains the tariff hikes implemented in 2024.
The proliferation of affordable smartphones and the increasing availability of content are fueling a healthy growth in data subscribers. By December 2024, broadband subscriber penetration had reached 79%, contributing to an average monthly data usage per subscriber of around 21.52 GB. This surge in data consumption, coupled with higher tariffs, is expected to significantly boost the industry’s profitability. ICRA projects a 12-14% expansion in industry profitability in FY25, potentially crossing ₹1.6 lakh crore, followed by a further 10-12% expansion in FY26.
While the industry has made substantial upfront investments in 5G rollouts during FY24 and FY25, ICRA believes that the capex intensity is likely to have peaked and is expected to moderate going forward. The total industry debt is estimated to increase to around ₹6.6 lakh crore as of March 31, 2025, but is expected to see a gradual decline thereafter. The industry’s debt to operating income ratio is likely to remain at 3.9-4 times, with interest coverage at 3.3 times for FY25, with potential improvements in the current fiscal.
However, ICRA also pointed out potential challenges to 5G expansion, including the lack of clear retail-based use cases, expensive customer equipment, and relatively low levels of fiberization of towers (estimated at around 38%). These factors have somewhat constrained ARPU growth.
Despite these challenges, the anticipated revenue growth driven by tariff hikes paints a positive outlook for the Indian telecom sector in the current fiscal year.
Key Highlights:
- Indian telecom revenues are projected to rise by 12-14% in the current fiscal year, primarily due to tariff hikes implemented in July 2024.
- The tariff hikes are expected to push the average revenue per user (ARPU) to ₹200 in FY25 and further to ₹220 by FY26.
- Increased 4G/5G adoption and data consumption are also contributing to revenue growth, with industry profitability expected to expand by 12-14% in FY25.
- While significant capex has been frontloaded for 5G, the overall debt is expected to moderate going forward.