Regular tariff hikes by telecom companies to continue in future: Centrum Report

The telecom industry has already witnessed three major tariff hikes in December 2019, November 2021, and July 2024. The report suggests that regular tariff hikes will continue in the future, which will help telecom companies improve their revenue. With rising prices, more customers are likely to shift to premium plans, leading to higher spending per user.

It said, "ARPU is surging due to deliberate pricing strategies and improving customer mix. Three tariff hikes; Dec'2019, Nov'2021 & July'2024. We expect regular tariff hikes going ahead too."

The report also noted that India's 2G customer base is expected to shrink significantly over the next 5-6 years. Currently, around 250 million customers in India still use 2G services.

Among telecom companies, Airtel has 23 per cent of its customers on 2G, while Vodafone Idea (VIL) has around 40 per cent. However, with the increasing adoption of 4G and 5G, the number of 2G users is expected to become negligible over time.

A key trend in the industry is the migration from 2G to 4G, along with a growing number of postpaid subscribers. This shift is improving the overall revenue per user. Additionally, data consumption is increasing, with customers opting for higher-priced data plans, such as those offering 2GB per day instead of 1GB.

Services like international roaming and OTT subscriptions have also grown significantly, with their revenue almost doubling over the last five years.

The Indian telecom sector is currently at a crucial stage. Competitive intensity has reduced, with three major private players--Jio, Airtel, and VIL--alongside the state-owned BSNL controlling the market. Rising revenue per user due to regular tariff hikes, an improving customer mix with more 4G and postpaid users, and strong data usage trends are helping telecom companies grow.

Additionally, profitability is improving, with operating costs stabilizing and EBITDA margins strengthening. Free cash flow is expected to rise in FY26-FY27 as companies slow down their capital expenditure following the rollout of 5G.

Meanwhile, India's satellite communication sector is also expanding, supported by government initiatives such as the Telecom Technology Development Fund Scheme and the Telecommunications Act, 2023. Open FDI policies, advancements in quantum satellite technology, and the expansion of VSAT networks are driving innovation in this space.

Elon Musk's satellite internet company, Starlink, has entered agreements with Bharti Airtel and Jio in India while also holding discussions with Vodafone Idea.

However, the report stated that the Starlink may face challenges in India due to regulatory hurdles, high import taxes, and the need to offer competitive pricing in a market known for its low-cost broadband services.