Telecom industry to need additional ARPU of ₹35-40 to get 15% ROCE: Ind-Ra

Ind-Ra says telcos need a Rs 35-40 ARPU increase to achieve 15% ROCE, indicating another round of tariff hikes even as profitability improves and capex intensity falls across the sector

India Ratings and Research (Ind-Ra) estimates that India’s telecom industry would need an additional average revenue per user (ARPU) of nearly ₹35–40 to achieve the target return on capital employed (ROCE) of 15 per cent. This, the ratings agency said, will require ARPU growth of 15–20 per cent from present levels, which, without tariff hikes, will take time as the agency expects organic ARPU growth to remain nearly 5 per cent.

 

The agency, while maintaining a neutral outlook for the telecom industry for FY27 in a webinar on Monday, said telcos’ ROCE was rising on account of reducing capex intensity and improving profitability. It added that mobile fixed wireless access (FWA) was expected to continue to be a key enabler for non-mobile broadband subscriber growth. Overall non-mobile broadband subscriber addition in the past few months already exceeded 75 per cent, recorded in December 2025.

 

“The government’s consistent support for both private and public sector unit (PSU) telcos demonstrates a supportive rather than regulatory environment, reflected in the sector in adjusted gross revenue (AGR) matters. This indicates that the recovery in operational performance of the telcos is showing a key improvement with ARPU increase and capex intensity reduction of ₹35–40 billion from Q3FY26 levels, which will yield ROCE beyond 15 per cent in the absence of a tariff hike,” said Priyanka Bansa, Associate Director, Ind-Ra.

 

The government’s support for private as well as public carriers aims to prevent a duopoly with a 3+1 player structure in the industry. “The government’s support for a large telco by way of (a) waiver of (b) bank guarantee requirement, (c) conversion of spectrum dues payable into equity cushion for FY26 and FY27, allowing telcos to focus on operational dynamics,” the agency said while referring to Vodafone Idea.

 

Ind-Ra also expects capacity ramp-up, strong demand and a positive regulatory environment over the next 12–18 months for telecom equipment suppliers and service providers to support their revenue growth.