MUMBAI: Operating profit of telecom companies is likely to grow a strong 12-14 per cent to Rs 1.55 trillion this fiscal, driven by surging data consumption and a consequent increase in the average revenue per user (ARPU), a Crisil report said.
The robust operating performance, along with declining capital expenditure intensity after the 5G rollout, will improve their free cash flow, supporting credit profiles of two of the three players, Crisil said in a report based on the analysis of Reliance Jio, Bharti Airtel and Vodafone Idea, which control 93 per cent of the subscriber market share.
While the 17 per cent operating profit last fiscal was due to tariff hikes, this year’s 12-14 per cent growth will be supported by strong intrinsic factors, the agency added.
According to Anand Kulkarni, a director with Crisil Ratings, "ARPUis 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% by March 2026 from 35% as of March 2025, is fuelling data consumption. Consequently, data usage is expected to increase to 31-32 GB in current fiscal from 27 GB last fiscal."
Additionally, the telcos have been rebalancing their offerings by reducing plans with low data limit or offering 5G services only on plans offering higher data limit. This is expected to move consumers to premium plans, boosting ARPUs fruther, he added.
Amid the rising demand for data-driven services, telcos have introduced premium plans that bundle over-the-top services. This strategy also helps telcos raise their ARPUs through upselling. Moreover, Internet penetration in rural and semi-urban areas is expected to increase by 4-5 per cent to 82 per cent by March 2026.
Users transiting from voice-only plans to data plans will further lift ARPUs. Typically, a voice-only plan with validity of 28 days is priced Rs 100 lower than an entry level data plan of the same validity.
Increase in ARPUs results in surge in operating profit, given that 60 per cent of the overall cost of telcos are fixed in nature. Thus, the industry benefits from high operating leverage and our analysis suggests that every Re 1 increase in ARPU adds Rs 850-950 crore to the industry operating profit.