India’s telecommunications sector is set for a strong year in FY26, with Crisil Ratings projecting 12–14% growth in operating profit, powered by surging data consumption, higher average revenue per user (ARPU), and improved cash flows following the completion of large-scale 5G deployments.

According to the report, the sector’s operating profit is expected to reach approximately
₹1.55 lakh crore (US$ 17.74 billion) during the year.

What’s Driving the Growth?

Crisil notes that for telecom operators, where around 60% of costs are fixed, even small improvements in ARPU translate into a large jump in profitability. In fact, every ₹1 increase in ARPU results in ₹850–950 crore (US$ 97–108 million) in additional Ebitdar (earnings before interest, taxes, depreciation and lease rentals) for the industry.

Capex Easing Boosts Free Cash Flow

The report highlights that, after two years of heavy investment in 5G spectrum acquisition and rollout, capital expenditure (capex) intensity is expected to moderate to 24–26% of revenue in FY26—down from an average of 31% over the previous two financial years.

This decline in capex, coupled with stronger earnings, is expected to boost operating free cash flow to around
₹70,000 crore (US$ 8.01 billion), most of which is likely to be used for debt reduction.

Net leverage for telecom operators is projected to improve from 3.4x in FY25 to about 2.7x in FY26, strengthening the sector’s overall credit profile.

With increasing 5G penetration in rural and semi-urban areas, and growing adoption of high-data entertainment bundles, the outlook for India’s telecom industry remains solid heading into FY26.

Would you like a telecom-player-wise breakdown of ARPU trends or a chart showing industry capex vs. free cash flow over the past five fiscal years?

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