Tariff hikes by the top three telecom companies will help increase the average revenue per user by 15 per cent and expand the operating profit by over 20 per cent in FY25, a domestic rating agency said on Monday. The 20 per cent hikes by the telcos after a two-and-a-half-year hiatus can expand the telcos' profit before interest, lease, depreciation and tax (PBILDT) by 20-22 per cent in FY25, Care Ratings said in a report.
It termed the same as a "structural positive" for the telecom sector, which is struggling on the Return on Capital Employed (ROCE) front because of the huge investments in the 5G rollout, including spectrum purchases, it said.
An analysis by the rating agency stated that the hikes will improve the telcos' blended average revenue per user (ARPU) by about 15 per cent to Rs 220 in FY25 from around Rs 191 in FY24.
Every one rupee increase in ARPU will add about Rs 1,000 crore to the industry's PBILDT, it added.
The 15 per cent jump in ARPU and consequently in profits will aid the telcos to deleverage capital, technology upgrades and network expansion, it said.
Its associate director, Prasanna Krishnan, said the sector's debt levels will moderate in FY25 and are expected to decline going forward with the expected moderation in capex intensity coupled with muted participation in the recently concluded June 2024 spectrum auction.
"The leverage ratio (debt/PBILDT) of the telcos is to improve from 4.35x in FY24 to 3.8x in FY25 with the expansion in PBILDT and some moderation in debt levels," he added.
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