India’s telecom sector is likely to see another calibrated tariff hike in FY27, with continued premiumisation expected to support a 10% growth in average revenue per user (ARPU) and drive 12-14% revenue growth, according to CareEdge Ratings.
The ratings agency expects subscriber additions to remain moderate as India’s wireless market approaches maturity, shifting the sector’s growth engine increasingly towards monetisation of the existing subscriber base.
ARPU takes centre stage
India’s telecom market continues to have a significant gap between data consumption and monetisation. While Indian users rank among the world’s highest consumers of mobile data, mobile ARPU remains at only US$2.5, indicating considerable headroom for further tariff rationalisation.
Nearly two years have elapsed since the last industry-wide tariff hike in July 2024. CareEdge Ratings expects another calibrated increase in tariffs in FY27 as operators seek to monetise growing data usage and improve returns on their investments.
Industry ARPU has already increased at a CAGR of 11%, rising from ₹142 in FY23 to ₹196 in FY26, despite the absence of an industry-wide tariff increase during the period.
The improvement has been supported by 2G-to-4G/5G migration, premiumisation, rising smartphone penetration, higher data consumption and improving subscriber quality.
Average mobile data consumption reached 26.7 GB per user per month in March 2026, while the Visitor Location Register (VLR) ratio improved to 93.7% in June 2026 from 92.85% in March 2025. The higher VLR ratio indicates a greater proportion of active subscribers on telecom networks.
Subscriber growth moderates
With the wireless market moving towards maturity, telecom subscriber growth is expected to moderate to 3-4% annually. This is reducing the contribution of subscriber additions to overall industry growth and making ARPU-led monetisation increasingly important.
CareEdge Ratings expects this structural shift to continue supporting sector revenues, with premiumisation and migration to higher-value services providing additional growth even before any tariff increase.
CareEdge Ratings Director Maulesh Desai said, “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.”
“Notably, India’s monthly data consumption of 26.7 GB per user is among the highest globally, while its ARPU of US$2.5 remains significantly lower than that of other major telecom markets. This combination underscores significant headroom for further tariff rationalisation, making another calibrated tariff hike in FY27 a key catalyst for the next phase of growth,” he added.
5G capex cycle starts easing
The sector is also moving beyond the peak investment phase associated with the nationwide 5G rollout. CareEdge Ratings expects this to improve the financial profile of telecom operators as capital expenditure moderates and operating leverage improves.
Capex intensity is projected to decline to 19% of revenue in FY27 from 22% in FY26. At the same time, EBITDA margins are expected to improve to 57% from 55%.
The combination of higher ARPU, revenue growth and lower capex intensity is expected to strengthen free cash flow generation and accelerate deleveraging.
Net debt-to-EBITDA is projected to decline to 2.3x in FY27 from 3.0x in FY26, pointing to an improving financial and credit profile for the sector.
CareEdge Ratings Associate Director Prasanna Krishnan said, “The sector is also moving beyond its peak investment cycle following the nationwide 5G rollout. As capex intensity moderates from 22% in FY26 to 19% of revenue in FY27, improving operating leverage is expected to lift EBITDA margins from 55% to 57% in FY27, thereby strengthening cash generation and accelerating deleveraging.”
“Consequently, Net Debt/EBITDA is projected to improve to 2.3x in FY27 from 3.0x in FY26, reinforcing the sector’s improving financial and credit profile through FY27,” he added.
Monetisation to drive next phase
The outlook indicates a shift in the telecom sector from network-led investment and subscriber acquisition towards monetisation and balance-sheet improvement.
With data usage continuing to rise, premiumisation deepening and a potential tariff hike providing an additional boost, CareEdge Ratings expects the sector to enter FY27 with stronger revenue growth and improved cash-generation prospects.
The moderation in 5G-related capex could further support free cash flows, while lower leverage is expected to strengthen the credit profile of telecom operators.