Telecom sector revenue won’t grow beyond high-single digits in the coming quarters without a tariff hike, though the presence of 207 million 2G users will continue to drive upgrades and support average revenue per user (ARPU) growth for India’s top two telcos in the medium term, say analysts.
However, they expect 5G capex spends to decelerate from FY25 onwards, which would pave the way for free cash flow (FCF) generation for the country’s private carriers after a 13-year gap, which would be a big catalyst for re-rating, going forward. “Revenue growth for the sector remains in high single-digits and needs a tariff hike for improvement, but lower network costs could offset margin impact of higher sales & marketing costs,” Jefferies said. Telecom industry revenue increased over 9% on-year in January-March FY23 and April-June FY24 quarters.
