Telcos operating profit likely to grow 12-14% this fiscal on data surge: Crisil Ratings

India’s telecommunications sector is projected to witness robust operating profit growth of 12–14% in FY26, reaching around Rs. 1,55,000 crore (US$ 17.74 billion), according to Crisil Ratings. This growth is largely driven by rising data consumption and an increase in average revenue per user (ARPU), expected to climb to Rs. 220- 225 (US$ 2.52- 2.58) from Rs. 205 (US$ 2.35) in FY25. Wider 5G network availability, projected to cover 45- 47% of users by March 2026, along with the shift from voice-only to data plans in rural and semi-urban areas, is fuelling higher data usage, estimated at 31-32 GB per subscriber. The move towards premium plans bundling over-the-top (OTT) services and higher data limits is further boosting ARPU. Given that roughly 60% of telcos’ costs are fixed, even small increases in ARPU significantly impact operating profit, with every Rs. 1 (US$ 0.011) rise contributing Rs. 850-950 crore (US$ 97.3-108.7 million) to industry Earnings before interest, taxes, depreciation, amortisation and payment of lease rentals (Ebitdar).
The improved operating performance is expected to enhance free cash flow due to moderated capital expenditure requirements, which are projected to fall to 24–26% of revenues from an average of 31% over the past two fiscals, following the completion of the major 5G rollout and prior spectrum purchases. This is likely to generate operating free cash flow of around Rs. 70,000 crore (US$ 8.01 billion), much of which will be used for debt reduction, lowering net leverage from 3.4 times in FY25 to approximately 2.7 times in FY26. The combination of rising ARPU, strong data adoption, and lower capex intensity augurs well for the credit profiles of leading telecom players.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.