Are Indian Telcos Set to Benefit from Rising Rural Data Usage?

New Delhi, May 13 (NationPress) The surge in internet adoption and data consumption among rural users is proving to be a key factor driving the growth of average revenue per user (ARPU) for Indian telecom companies. To leverage this trend, telecom operators are enhancing rural connectivity, which is expected to boost their data subscriber base and overall profits, as highlighted in a report released on Tuesday.

Between 2020 and December 31, 2024, internet penetration in rural India is projected to rise from 59% to 78%, outpacing urban growth from 77% to 90%, according to a report by Crisil Ratings.

By the conclusion of fiscal 2026, rural internet penetration is anticipated to further grow by 4-5%, fueled by the ongoing adoption of online communication, digital payment platforms, and a growing interest in social media, content streaming, and e-commerce.

Despite being more sensitive to pricing, the rural internet user base has shown resilience over the past year, even amidst tariff increases introduced in mid-2024, underscoring the significant reliance of rural users on mobile internet.

The increase in per-user data consumption in rural regions is also supported by network expansion, competitively priced plans, and enhanced smartphone affordability. Much of this growth is evident in circles B and C, which account for nearly 70% of India’s rural subscriber base.

Data consumption in these sectors has recorded a compound annual growth rate of 19-22% over the last four years, surpassing the 17-19% growth observed in metropolitan areas, signaling the widespread adoption of mobile data services and a steady demand for them. This upward trend is expected to continue with the expansion of 4G networks in less penetrated regions, further driving ARPU increases.

Anand Kulkarni, the director at Crisil Ratings, stated, “The industry ARPU is anticipated to grow by Rs 20-25, reaching Rs 225-230 by the end of this fiscal year, provided tariffs remain stable. Approximately 55-60% of the incremental ARPU is expected to derive from rural subscribers.”

In alignment with this trend, telecom companies are modifying their offerings to include various data-centric plans and are investing in spectrum acquisition and tower density in rural areas. During the auction in June 2024, telecom operators secured the majority of the spectrum in circles B and C. Additionally, a significant portion of the planned capital expenditure of Rs 8,000-9,000 crore by independent telecom tower companies in fiscal 2026 will be allocated for rural infrastructure.

Crisil Ratings team leader Mohini Chatterjee mentioned, “Focused investments in network and spectrum in rural areas, combined with ARPU growth, will elevate telecom operators’ return on capital employed from around 10% in fiscal 2025 to approximately 12% in fiscal 2026. Given that 75% of the costs are fixed, even a modest increase in ARPU could substantially enhance earnings.”