A round of tariff hike in India’s telecom, alongside continued premiumisation, is expected to support 10% average revenue per user (Arpu) growth and 12-14% revenue growth in FY27 even as subscriber additions remain moderate, ratings agency CareEdge Ratings said in a recent report.
The agency said that India’s telecom market continues to exhibit one of the widest gaps between data consumption and monetisation. Despite having among the world’s highest mobile data usage levels, mobile Arpu remains at around Rs 200, highlighting significant headroom for further tariff rationalisation. With nearly two years having elapsed since the last industry-wide tariff hike, another calibrated increase appears likely in FY27.
Most analysts and brokerages expected a headline tariff hike in the first half of the fiscal, though now expectations have been pushed to the end of FY27.
The completion of the peak 5G investment cycle should drive a structural improvement in the sector’s financial profile, CareEdge said, adding Ebida margins could improve from 55% in FY26 to 57% in FY27, while capex intensity is estimated to moderate to 19% from 22%. Together, these factors should support stronger free cash flow generation and deleveraging, with net debt-to-Ebitda declining from 3.0x in FY26 to 2.3x in FY27, the agency added.
“India’s telecom sector has entered a fundamentally different growth phase, with earnings increasingly driven by Arpu-led monetisation of the existing subscriber base rather than subscriber additions. The continued rise in Arpu, despite no tariff hike since July 2024, highlights the strength of ongoing premiumisation, 2G-to-4G/5G migration, rising smartphone penetration, and improving subscriber quality,” Maulesh Desai, director, CareEdge Ratings said.
As India’s wireless market approaches maturity, telecom subscriber growth is moderating to 3-4% per annum, reducing the contribution of subscriber additions to industry growth and shifting the focus towards Arpu-led monetisation of the existing subscriber base.
Industry Arpu has increased at a CAGR of 11% from Rs 142 in FY23 to Rs 196 in FY26, implying that revenue growth is no longer solely dependent on periodic tariff hikes, the agency said in the report
Arpu expansion is being driven by ongoing 2G-to-4G/5G migration, premiumisation, rising smartphone penetration, higher data consumption, and improved subscriber quality. Average mobile data usage in March 2026 reached 26.7 GB per user per month, while the Visitor Location Register (VLR) ratio has improved to 93.7% in June 2026, from 92.85% in March 2025, indicating a higher proportion of active subscribers.