Indian telecom operators are expected to post a healthy 12–14 percent year-on-year increase in operating profit in FY26, reaching nearly Rs 1.55 lakh crore. The growth will be fuelled by rising data consumption and a resulting improvement in average revenue per user (ARPU), Crisil Ratings said in a report released on August 18.
In FY25, the sector’s earnings before interest, taxes, depreciation, amortisation, and rent (Ebitdar) expanded by about 17 percent to Rs 1.4 lakh crore, riding on tariff hikes by the top three private telecom players in July 2024, the agency said.
“The sector’s strong operating metrics, together with lower capital expenditure (capex) intensity after the completion of major 5G rollouts, are expected to strengthen free cash flows. This, in turn, will support the credit profiles of leading telcos,” Crisil Ratings said.
Its assessment covered Reliance Jio, Bharti Airtel and Vodafone Idea (Vi), which together account for close to 93 percent of India’s mobile subscriber base.
5G, Bharat boost for ARPU
Crisil Ratings’ director Anand Kulkarni added that ARPU levels could climb to Rs 220–225 in FY26, up from Rs 205 in FY25. The rise would be driven by operators trimming low-data plans and linking 5G access to higher data packs.
“This shift will encourage more customers to move towards premium offerings, thereby pushing ARPUs higher,” Kulkarni said.
The ratings firm, however, said its analysis does not include any fresh tariff hike assumptions for FY26. It underlined that ARPU growth has a disproportionate impact on profitability, as roughly 60 percent of telecom operators’ costs are fixed.
“Given the high operating leverage, every Rs 1 increase in ARPU translates into an additional Rs 850–950 crore in industry-wide Ebitdar,” Crisil said in the note.
With consumers demanding more data-heavy services and wider 5G access, operators have rolled out premium plans bundled with OTT subscriptions. These value-added packs are also helping push subscribers towards higher-paying tiers, the agency said.
Internet usage in rural and semi-urban India is set to deepen further, with penetration forecast to rise by 4–5 percentage points to around 82 percent by FY26. Alongside, more users shifting from voice-only offerings to data plans will continue to boost ARPU, the report said.
While Reliance Jio and Airtel already operate pan-India 5G networks, Vodafone Idea has recently entered the fray, saying the 5G service is live in 17 cities. The operator, India’s third-largest, is focusing its rollout on 17 priority circles.
Crisil expects 5G adoption to climb from roughly 35 percent in FY25 to 45–47 percent by FY26. The faster networks will drive heavy data usage for new applications, including generative AI, pushing average consumption up to 31–32 GB per user per month, from about 27 GB in FY25.
The projected rise in operating profit will also feed into higher free cash flows, helped by a decline in capex intensity. “Capex intensity, which had averaged about 31 percent over the past two years, is forecast to ease to 24–26 percent this fiscal, as the bulk of 5G rollout has already been completed. Spectrum purchases too are largely behind us, with the next major renewal due only in 2030,” said Nitin Bansal, associate director at Crisil Ratings.
According to Bansal, this easing of investments will translate into healthy operating free cash flow of nearly Rs 70,000 crore in FY26, much of which will likely be channelled towards reducing industry debt.
(Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.)
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