Tariff hikes to push telcos' ARPU to decadal high of Rs 225 in FY26: Crisil

Mumbai: The near-simultaneous tariff hikes by all major private operators will push up telcos' average revenue per user (ARPU) to a decadal high of over Rs 225 in FY26, domestic rating agency Crisil said on Tuesday.

Credit profiles of telcos will also improve on the higher profitability and the lower capital expenditure, the agency said.

The ARPU -- one of the most keenly tracked metrics influencing the financial health of an entity -- will increase 25 per cent in FY26 when compared to FY24, it said.

"The industry ARPU should dial up to a decadal high of Rs 225-230 by end of next fiscal compared with Rs 182 last fiscal," its deputy chief rating officer Manish Gupta said.

It can be noted that after the formation of the new government following the general elections, the top three private sector telcos hiked their tariff rates by up to 20 per cent.

Gupta said the increased data usage following the introduction of the 5G services will also help the ARPUs.

He said customers have also been "uptrading" their tariff plans due to higher data consumption arising out of video streaming services usage, social media, and gaming.

The agency expects the ARPU growth to be gradual and to get spread over the current fiscal year and the next, because the hikes become effective only with the next recharge in the predominantly prepaid market.

The hikes will help improve the return on capital employed for the industry to 11 per cent by the end of FY26, from 7.5 per cent in FY24, it said, adding that the industry has witnessed a "suppression" on this metric in the last few years.

The capex intensity -- or the investments as a share of revenue -- will come down to 19 per cent in the next fiscal year from the 28 per cent in FY24 as most of the telcos have completed their 5G rollouts and only fiberisation of towers, setting up base receiver station remain.

The new spectrum capex is also likely to reduce as most of the spectrum purchase was done in FY23 itself and the renewal is due only in FY30.

On the back of capex moderation and healthy profitability, telcos' overall debt will reduce to Rs 5.6 lakh crore by the end FY26 from a peak of Rs 6.4 lakh crore in FY24, Anand Kulkarni, a director at Crisil, said.

He added that this will help improve the debt-to-operating profit to less than 3 by the end of FY26, from 4.3 in FY24.

The agency said if the telcos go for another hike, it will act as an upside to its estimates.