New Delhi, Aug 18 (NationPress) The operating profit of India's telecom firms is anticipated to witness a robust growth of 12-14%, reaching Rs 1.55 lakh crore this fiscal year, driven by escalating data usage and a resulting rise in the average revenue per user (ARPU), according to a report released on Monday.

This strong operating performance is coupled with a decline in capital expenditure (capex) intensity from major players, following the completion of the 5G rollout, which will enhance their free cash flow. This development will positively impact the credit profiles of leading industry players, as highlighted by Crisil Ratings in its report.

In the previous fiscal year, the growth of operating profit was at 17%, largely propelled by tariff increases. This year's growth is expected to be supported by strong intrinsic factors, as stated in the report.

“ARPU is projected to rise to Rs 220-225 this fiscal from Rs 205 last fiscal, primarily due to increased data consumption. The broader availability of the 5G network, with penetration anticipated to reach 45–47% by March 2026, up from 35% as of March 2025, is driving data usage for services such as social media, video streaming, gaming, generative artificial intelligence, and digital marketing,” remarked Anand Kulkarni, Director at Crisil Ratings.

As a result, data consumption is expected to rise to 31-32 GB this fiscal from 27 GB last fiscal, he noted.

Moreover, Indian telecom operators are adjusting their offerings by phasing out plans with low data limits or providing 5G services exclusively with higher data limits.

This shift is expected to encourage consumers to transition to premium plans, thereby boosting telco ARPU, Kulkarni added.

In response to the growing demand for data-driven services, telecom companies have rolled out premium plans that include over-the-top (OTT) services, effectively increasing ARPU through upselling.

Additionally, internet penetration in rural and semi-urban regions is projected to increase by 4-5%, reaching 82% by fiscal 2026, as noted in the report.

Users moving from voice-only plans to data plans will further elevate ARPU.

An increase in ARPU leads to a significant rise in operating profit, given that 60% of telecom companies' overall costs are fixed.

Thus, the telecom sector enjoys high operating leverage, with every Rs 1 increase in ARPU contributing an additional Rs 850 - 950 crore to the industry's operating profit, according to the report.

“Capex intensity, which has averaged 31% over the past two fiscal years, is expected to moderate to 24-26% this fiscal as the major part of the 5G network rollout has been accomplished by leading telecom operators. Furthermore, most spectrum purchases were completed in fiscal 2023, with the next significant spectrum renewal set for 2030,” said Nitin Bansal, Associate Director at Crisil Ratings.