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Telecom companies in India are likely to increase tariffs by around 20 per cent in financial year 2026-27 (FY27), according to a report released by ICICI Securities.
The report, which had earlier projected a tariff hike in the second quarter of FY26, now expects the increase to happen in FY27. "We forecast subs to keep growing at 2 per cent p.a. and have assumed one large tariff hike in FY27E (approx. 20 per cent hike across categories)," the report said. The report projected that the number of subscribers will continue to grow at 2 per cent annually. It has factored in only one major tariff hike in FY27 across all categories, with no significant changes in tariffs thereafter. The report also estimated that the industry's adjusted gross revenue (AGR), including national long distance (NLD), would grow at a compound annual growth rate (CAGR) of 9.8 per cent from FY25 to FY30, reaching Rs 4,274 billion by FY30. The market share of telecom operators is expected to remain broadly stable during this period. Based on this assumption, the report stated that all three private telecom companies are expected to improve their AGR (including NLD) market share by 10 to 50 basis points between FY25 and FY30. The report also highlighted a fixed broadband macro model and expects the revenue from this segment to grow at a CAGR of 15.4 per cent during FY25-30. It stated that Reliance Jio and Bharti Airtel are projected to gain the largest share in the fixed broadband segment. The report also noted that capital expenditure by private telecom operators may stay flat or slightly decrease, which would support strong free cash flow generation. This, in turn, could lead to better returns for shareholders through dividends or share buybacks. On satellite communication (Satcom), the report mentioned that most of Starlink's investments are focused on fixed broadband, while direct-to-consumer (DTC) mobile services are meant to boost coverage. It does not expect major disruption from Satcom in the forecast period. The report also underlined the growing pricing power of telecom companies due to increasing service usage. Between FY17 and FY25, voice usage (minutes of usage) and data usage grew at a CAGR of 12.6 per cent and 37 per cent, respectively. On average, the report mentioned that subscribers now spend more than 3 hours daily on mobile. Unlike earlier periods when competition from new entrants reduced pricing power, the current scenario shows minimal risk from new players. Therefore, ICICI Securities believes that telecom operators will continue to enjoy strong pricing power in the foreseeable future. (ANI)
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