India’s telecommunications companies (telcos) are poised to boost their operating profits (EBITDA) by 15-17 per cent to approximately Rs. 1.2 lakh crore in the current fiscal year, up from about Rs. 1.04 lakh crore in the previous fiscal, according to Crisil.

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The telecommunications sector benefits from high operating leverage, with a significant portion of costs being fixed. Any increase in ARPU directly contributes to operating profit. Operating profit nearly doubled between fiscal years 2020 and 2023, while ARPU increased by 1.4 times. The ARPU is projected to grow by 8–10 per cent year-on-year to approximately Rs. 190 this fiscal year. Increased data usage, expected to reach 23–25 GB per subscriber per month, and tariff plan adjustments will drive this growth, ultimately leading to enhanced operating profitability.

Naveen Vaidyanathan, Director, CRISIL Ratings, says, “Large spectrum investments last fiscal resulted in the debt of telcos (including lease liabilities) rising to Rs. 6.3 lakh crore as of March 31, 2023, from Rs. 4.6 lakh crore as on March 31, 2022. Investments in 5G services could result in that number rising to Rs. 6.5 lakh crore by the end of this fiscal year. Yet, the leverage of telcos rated by CRISIL Ratings should improve because of better profitability. Their debt-to-EBITDA ratio is foreseen at 3.0 times this fiscal, compared with 3.3 times last fiscal.”

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Despite limited monetization of 5G services due to evolving use cases and low penetration of 5G handsets in India, the sector is expected to witness a 15–17 per cent increase in operating profit to around Rs. 1.2 lakh crore. 4G technology is expected to remain dominant for the time being. Telcos are likely to invest approximately Rs. 90,000 crore this fiscal to strengthen network infrastructure and improve services, compared to around Rs. 80,000 crore in the previous fiscal. 

Shares of Vodafone Idea were up by 3.45 per cent to Rs. 8.99 at 01.40 pm on the BSE.