Rising costs, Iran war: Telcos may face dual headwinds in coming quarters

Rising smartphone prices and weaker travel demand may slow 2G upgrades and hit roaming revenues, posing near-term challenges for Indian telcos

Telcos may face dual headwinds in the coming quarters. On the one hand, the sharp rise in prices of entry level smartphones, due to memory prices quadrupling, is expected to slow the transition of subscribers from 2G to 4G or 5G in the price-sensitive Indian market. On the other hand, curtailed leisure and corporate travel due to the ongoing West Asian conflict could dent telcos’ revenues coming from international roaming.

 

“Rising handset prices might temporarily slow 2G-to-4G/5G upgrades among price-sensitive users, potentially stretching the migration curve by a quarter or two,” said Vinish Bawa, partner and leader, telecom, at consultancy PwC India.  

 

“Ongoing West Asian conflict is expected to moderately slow the 2G to 4G/5G transition, as rising component and logistics costs push device prices higher, impacting affordability in the entry segment. In the near term, the impact will be more pronounced among price-sensitive users, while a prolonged disruption could push the slowdown up to 35-40%, driven by sustained pricing pressure and weaker consumer demand,” said Siddhant Cally, research analyst at Counterpoint Research.

 

The transition from 2G to 4G and 5G is a fundamental shift, offering the potential to nearly double revenue per user as customers move to modern broadband services, said market watchers. India currently has about 200-250 million 2G customers, largely with Bharat Sanchar Nigam Ltd, Vodafone Idea and Bharti Airtel. Reliance Jio, the largest carrier without any 2G customers, has been pushing for faster transition of India’s 2G base to 4G and 5G.

 

“While upgrades to 4G/5G are strategic, the primary driver of near-term revenue growth comes from existing 4G/5G users upgrading to higher data plans,” said a senior executive asking not to be named. He added that the recent tariff hikes and upcoming hikes of 10-20 per cent over the next two quarters, as being projected by brokerages, would be for data or 4G/ 5G subscribers, leaving out the 2G base.  

 

“In a price-sensitive market like India, the uptake of 4G/5G technology will be a gradual cycle for the remaining 20% of subscribers and ARPU growth will likely be slow and steady as consumers navigate these pricing pressures,” Cally added.

 

Meanwhile, the escalating conflict in West Asia may take its toll on telecom companies’ international roaming revenues, said market watchers, especially after carriers had launched specialised products to cater to the rising number of Indians travelling overseas. India’s outbound travel market has risen to 32.7 million in 2025 up by 21.5 per cent from 2019 and 6 per cent from 2024.

 

“Leisure and business outbound travel may get reduced if the war continues to go on for more than a few weeks. This will hit the international roaming revenues. While it may contribute only 2-3 per cent to overall industry revenues, a hit to this revenue segment will straightaway be felt on margins,” said a senior analyst tracking the sector.  

 

According to data from Telecom Regulatory Authority of India, the total revenues from the telecom sector stood at Rs 3.03 trillion for FY25. With an estimated 2-3 per cent of revenues coming from international roaming, the contribution to revenue comes to Rs 8,000-10,000 crore.