India telecom ARPU set to rise 7% annually, narrowing global tariff gap

India’s telecom sector is poised for a multi‑year recovery as mobile ARPU is expected to grow at about 7 percent CAGR between FY26 and FY29, according to a new sector update by Elara Capital. The brokerage says the industry is now “well‑positioned” to push through further tariff hikes on the back of robust data demand and a sharp consolidation in the market from 17 operators to just four players.

Elara believes the projected ARPU trajectory will help narrow India’s long‑standing tariff gap with global markets, even as the country remains one of the world’s most affordable mobile services providers on both headline and PPP‑adjusted metrics. Despite repeated hikes in recent years, India still trails many large markets on comparable usage baskets, leaving “meaningful headroom” for price increases without materially hurting affordability, the report notes.

The improvement in ARPU, coupled with moderating capex after heavy 4G and 5G investments, is expected to drive stronger free cash flows and support ongoing deleveraging at the large private operators. Domestic ratings agency ICRA has separately estimated that sector ARPU could already be headed towards the ₹200–210 range in the near term, reinforcing the view that earnings and return ratios are set to improve from FY26 onwards.

CT Bureau