Summary:
UBS India expects telecom tariffs to increase moderately over the next three years, with ARPU projected to grow 8–8.5% annually, below the 12–13% growth seen over the past five years. Stronger competition from a financially improving Vodafone Idea could limit aggressive price hikes, while customer upgrades from 2G to 4G and prepaid to postpaid are expected to support ARPU growth. Although operators may revisit pricing after the last industry-wide hike in July 2024, UBS expects future tariff increases to remain relatively measured.
According to the head of Asia Pacific Telecommunications, Media and Internet at UBS India, telecom tariffs are expected to rise at a moderate pace over the next three years. Average revenue per user (ARPU) is projected to increase at a compound annual growth rate of 8-8.5 per cent, lower than the sector’s 12-13 per cent annual ARPU growth over the previous five years.
The more subdued outlook is partly attributed to expectations of stronger competition as Vodafone Idea Limited (Vi) improves its financial standing. He said the operator’s anticipated fundraising could help reduce the gap in capital expenditure with Bharti Airtel and Reliance Jio, although a substantial difference in network investment would continue and closing it would take time.
Vi’s expected capital infusion follows the government’s February 2026 decision to defer and reduce the company’s adjusted gross revenue (AGR) liabilities. The resulting improvement in Vi’s balance sheet has created scope for additional funding, with the outcome of the fundraising process likely to affect competitive dynamics and the future capital expenditure plans of telecom operators.
He estimated that about 5 percentage points of annual ARPU growth over the next three years could be generated organically through customer upgrades, including the shift from 2G to 4G and from prepaid to postpaid services. Tariff increases are expected to contribute another 3-3.5 percentage points, compared with 6-7 percentage points contributed by pricing over the previous five years.
This changing composition of growth means that a 10 per cent increase in tariffs would generally result in only a 6-7 per cent rise in ARPU, since higher prices do not translate fully into realised revenue.
He also pointed out that telecom operators have traditionally implemented tariff increases every 18-24 months, while the most recent industry-wide hike occurred in July 2024. With more than two years now having elapsed since that increase, operators may reconsider their pricing strategies, although UBS expects upcoming tariff hikes to be more moderate.
He added that market expectations have already factored in concerns over Airtel’s performance and projections of steep tariff increases.
