Rural Surge Powers Indian Telecom ARPU Growth

Indian telecom operators are projected to witness a 10-12% increase in average revenue per user (ARPU) during the 2025-26 fiscal year, fueled by a substantial rise in rural data consumption, as reported by Crisil Ratings. This growth is attributed to the swelling internet adoption and data consumption among rural users.

Crisil highlighted that to harness this opportunity, telecom companies are enhancing rural connectivity to expand their subscriber base and revenue. Since December 2019, telecom tariffs have seen consistent hikes at a compounded annual growth rate of 12-15%, with the most recent increase occurring in July 2024.

Rural internet penetration surged from 59% to 78% over four years, surpassing urban areas. This trend is expected to rise an additional 4-5% by FY 2025-26, driven by online communication, digital payments, and the growing popularity of social media, content streaming, and e-commerce.

Despite being price-sensitive, the rural user base remained robust against the mid-2024 tariff hikes, underscoring their dependence on mobile internet. Crisil anticipates that the expansion of 4G networks in under-served areas will sustain data consumption growth, boosting ARPU further.

Anand Kulkarni, Director at Crisil Ratings, stated that ARPU is expected to rise by Rs 20-25, reaching Rs 225-230 by the fiscal year's end, with rural subscribers contributing 55-60% of the increment.

While lower internet penetration in rural areas is set to drive subscriber migration to data plans, the affordability of these plans remains crucial. In rural settings, mobile phones serve as the primary internet gateway, unlike urban areas where users have access to alternatives like wi-fi, as noted by Crisil Ratings.

(With inputs from agencies.)