Telecommunications businesses resort to leveraging data to augment Average Revenue Per User (ARPU) following the depletion of tariff strategies
India's telecom sector is gearing up for a new phase of growth, with the Average Revenue Per User (ARPU) projected to rise to around Rs 220-225 by March 2026, according to analysts. This growth is primarily driven by surging data consumption supported by wider 5G availability.
Titus M, Practice Director at the Everest Group, has stated that the next major driver for ARPU will be premium data packs, including unlimited 5G packs. The industry's operating profit is expected to grow 12-14%, reaching about Rs 1.55 lakh crore in FY26, partly attributable to this ARPU increase.
Key factors influencing this growth include rising data consumption, expansion of 5G network penetration, telcos' strategic shift away from entry-level plans towards premium data plans, and increasing rural and semi-urban internet penetration.
Data usage is expected to increase to 31-32 GB per user from 27 GB last fiscal, driven by the demand for data-heavy applications like social media, video streaming, gaming, generative AI, and digital marketing. 5G network penetration is projected to touch 45 - 47 per cent by March 2026, fueling this demand.
Telcos have been rebalancing their offerings by reducing plans with low data limit or offering 5G services only on plans offering higher data limit. This strategic shift towards premium data plans is expected to encourage consumers to upgrade and boost ARPU.
The enterprise segment is another opportunity, set to benefit from 5G deployments, cloud-edge partnerships, and integration of AI into their digital platforms. India's three private telcos have discussed the role of data consumption in ARPU numbers during their latest earnings calls.
Bharti Airtel's ARPU alone is forecasted to increase beyond Rs 280 by the end of FY26, supported by tariff hikes and a better subscriber mix. Vodafone Idea (Vi) mentioned a 10% annual growth in data traffic and a 15% consumer ARPU increase.
Axis Securities states that FY26 will be a year of 5G monetisation, margin expansion, and stronger cash generation for the major players in the telecom sector. Analysts predict that data surge will be the next significant factor driving ARPU growth in India.
Last fiscal year, the telecom sector reported substantial operating profit and ARPU growth due to tariff hikes announced earlier in the financial year. Axis Securities predicts that premium plan adoption, increased data consumption, and rational pricing discipline will drive ARPU gains.
In summary, rising data consumption driven by 5G penetration and premiumization of plans is projected to significantly increase ARPU in India’s telecom sector to Rs 220-225 by March 2026, bolstering industry profitability. The sector is showing strong data consumption, and demand for data continues to accelerate, according to Axis Securities.
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