Telcos' Tariff Hike to Boost Revenue, Profit and Sector Stability by 2025

Top three telecom companies' tariff hikes expected to increase average revenue per user by 15% and boost operating profits by over 20% in FY25, according to a domestic rating agency. The hikes are seen as crucial for the sector's financial health and future investments in 5G technology.

In a significant move, tariff hikes by the top three telecom giants are projected to boost the average revenue per user by 15% and expand their operating profits by more than 20% in FY25, according to a report from Care Ratings, a domestic rating agency, released on Monday.

The telecom sector, which has been struggling with low Return on Capital Employed (ROCE) due to massive investments in 5G rollout and spectrum purchases, will benefit structurally from these tariff hikes. Care Ratings highlights that the sector's profit before interest lease depreciation and tax (PBILDT) is expected to surge by 20-22% in FY25.

Detailed analysis by the rating agency shows that the average revenue per user (ARPU) is expected to climb to Rs 220 in FY25 from Rs 191 in FY24. This increase in ARPU and subsequent profit growth will enable telcos to reduce debt levels, invest in technology upgrades, and expand their networks, fostering long-term stability in the telecom sector, added Prasanna Krishnan, associate director at Care Ratings.

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