Elara Capital: Indian telecom sector set for growth, recovery phase

India's telecom sector is entering a multi-year growth phase with ARPU CAGR expected to hit 7% during FY26-29E, according to an Elara Capital report. This growth is driven by tariff hikes, data demand, and lower capex, says the report.

India's telecom sector is entering a multi-year growth and recovery phase with ARPU CAGR expected to grow to 7% during FY26-29E, which will likely reduce India's tariff gap, as per a report by Elara Capital.

Sector Poised for Stronger Cash Flows, Deleveraging

Noting that the industry consolidation is largely complete and tariffs are still among the lowest globally", the report noted, "The sector is well-positioned for stronger cash flows, faster deleveraging, earnings upgrades, and improved returns."

India's telecom sector is in a multi-year recovery, driven by ARPU improvement, structural data demand, and lower incremental capex. This creates a favorable backdrop for earnings upgrade, deleveraging and higher free cash flow conversion.

Data Consumption Boom to Continue

According to the report, India's telecom sector is driving a data consumption boom supported by affordable tariffs, widespread smartphone adoption, and expanding network coverage across rural India. "We model an ARPU CAGR of 7% during FY26-29E, which should reduce India's tariff gap with global markets and restore attractive returns on invested capital," it said.

According to the report, India's per-user monthly data consumption increased from ~15x to ~21GB during CY16-24. According to Elara, the next phase of data growth will be more sustained, fueled by higher digital engagement, the adoption of data-intensive applications such as video, cloud gaming, enterprise SaaS, and IoT, and deeper digital integration across consumer and business segments. "We see a credible path for per-subscriber use to exceed 65GB per subscriber in the next decade from ~21GB in CY24," it said.

ARPU CAGR to Accelerate

According to Elara, the telecom sector is well-positioned to raise ARPU, which is projected to grow at a 7 per cent CAGR between FY26 and FY29. "We expect ARPU CAGR to accelerate to 7% during FY26-29E," the report said.

This shift is expected to be supported by tariff hikes, abundant bundled service offerings, elevated data use being a staple behavior and disciplined pricing. "We expect blended ARPU to increase to 6 per cent in FY27E, 8 per cent in FY28E, and 6 per cent in FY29E, driven by tariff resets and higher average consumption," the report added. (ANI)

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