Indian telcos' operating profit to rise by 12-14% to ₹1.55 lakh crore in FY26: Crisil
Crisil Ratings report
released on Monday.
Last fiscal year, the Ebitdar grew by approximately ~17% to ₹1.4 lakh crore, predominantly due to the tariff hikes undertaken by the top three private telcos in July 2024, according to the report.
'The robust operating performance, along with declining capital expenditure (capex) intensity of leading players after completion of 5G rollout, will improve their free cash flow. This will support credit profiles of leading players in the industry,' the ratings agency said, basis its analysis of
Reliance Jio
,
Bharti Airtel
, and
Vodafone Idea
(Vi,) which together hold about 93% of the subscriber market share.
According to Anand Kulkarni, director,
Crisil Ratings
, the ARPU may increase to ₹220-225 in FY26 – up from ₹205 in FY25 – as Indian telcos have been rebalancing their offering by reducing plans with low data limits, or providing 5G services only on plans with higher data limits.
'This trend is expected to move consumers to premium plans, boosting telco ARPU,' he said.
CRISIL, though, has not factored in any tariff hike this fiscal in its analysis. According to it, an increase in ARPU results in a surge in Ebitdar, given that about 60% of the overall cost of telcos is fixed in nature.
'Thus, telecom industry benefits from high operating leverage and our analysis suggests that every ₹1 increase in ARPU adds ₹850-950 crore to the industry Ebitdar,' Crisil said.
Amid the rising demand for data-driven services, on the back of expanding penetration of fifth-generation (5G) networks, telcos have introduced premium plans that bundle over-the-top (OTT) services, which help raise APRU through upselling, Crisil noted.
Additionally, the internet penetration in rural and semi-urban areas is expected to increase by 4-5% rising to 82% by fiscal 2026. This, combined with the migration of users from voice-only plans to data plans, will further lift the ARPU, said the ratings agency.
While Jio and Airtel already provide nationwide 5G networks, Vi has recently joined the race and said its 5G network was live in 17 cities pan-India. The third-largest Indian telco aims to provide the latest-generation of wireless broadband network in its 17 priority circles.
Crisil estimated that the 5G penetration will rise from nearly 35% in FY25 to about 45-47% by FY26, with the 5G networks fueling data consumption for various applications, including generative artificial intelligence (GenAI). Consequently, data usage is expected to increase to 31-32 GB in FY26, from ~27 GB in FY25.
The expansion in operating profit will also improve free cash flow because of lower capex requirements.
'Capex intensity, which averaged ~31% over the past two fiscals, is expected to moderate to 24-26% this fiscal as a large part of 5G network rollout has been completed by the leading telcos. Furthermore, most of the spectrum purchase was completed in fiscal 2023 and next significant spectrum renewal will be due in 2030,' said Nitin Bansal, associate director, Crisil Ratings.
Bansal said this will result in healthy operating free cash flow of around ₹70,000 crore this fiscal, a large part of which will likely be utilised for debt reduction.
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