Indian telcos are looking to increase their average revenue per user (ARPU) figure in the short-term. Telcos raised the mobile tariffs recently to boost their ARPU. While the maximum effect of that has already come in, the telcos would look forward to the slow and incremental gains that they will see in their ARPU figure as users recharge with more premium plans and increase their data consumption. On that note, it is worth noting that data consumption is going up in rural India as well. This is something that will help the telcos in boosting their ARPU signficantly.
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Telcos are already investing in expanding their 4G networks to more and more rural areas. This will help them boost their ARPU by 10-12% this fiscal. Anand Kulkarni, Director, Crisil Rating said, “The industry ARPU is expected to rise by Rs 20-25 to reach Rs 225-230 by the end of this fiscal, assuming tariffs remain stable. Around 55-60% of the incremental ARPU is expected to come from rural subscribers. Relatively lower internet penetration in rural regions will drive migration of subscribers to data plans. Additionally, uptrading of plans due to higher data consumption will also drive ARPU growth. Here as well, rural areas will play a key role as mobile phones serve as the primary gateway vis-à-vis metro users, who have alternatives such as wi-fi.”
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It is worth noting that Airtel and Jio have slowed down 5G rollout. Instead, the telcos are rolling out 4G in more rural parts of the country. Even in the spectrum auction of 2024, telcos acquired most of their airwaves in the B and C telecom circles.
“The targeted network and spectrum investments in rural areas, along with growth in ARPU, will help increase telcos’ return on capital employed to ~12% in fiscal 2026 from ~10% in fiscal 2025. With ~75% of the cost being fixed in nature, even a modest hike in ARPU can materially benefit earnings,” said Mohini Chatterjee, team leader, Crisil Ratings.
