India’s telecom industry is set to see a 10-12% increase in average revenue per user (ARPU) during the 2025-26 financial year, driven by a surge in rural data consumption, according to Crisil Ratings.
Rural data consumption, coupled with growing internet adoption, is emerging as a key growth driver for Indian telecom operators. To leverage this trend, telecom companies are enhancing rural connectivity, which will help them expand their subscriber base and increase returns.
Since December 2019, telecom tariffs have seen a compound annual growth rate (CAGR) of 12-15%, following successive hikes in 2019, 2021, and 2024, with the most recent tariff increase in July 2024.
Over the four years leading to December 2024, internet penetration in rural India increased from 59% to 78%, outpacing urban areas, which grew from 77% to 90%. Rural internet penetration is expected to rise further by 4-5% by the end of FY 2025-26, fueled by greater adoption of online communication, digital payments, social media, content streaming, and e-commerce.
Despite being more price-sensitive, rural internet users have remained resilient, even amid tariff hikes in mid-2024, highlighting their reliance on mobile internet, as stated by Crisil.
This data consumption trend is expected to continue with the expansion of 4G networks in rural areas, further boosting ARPU.
Anand Kulkarni, Director of Crisil Ratings, stated, “Industry ARPU is projected to increase by Rs 20-25, reaching Rs 225-230 by the end of this fiscal year, assuming tariffs remain stable.”
Crisil further noted that approximately 55-60% of the ARPU increase will come from rural subscribers. The relatively lower internet penetration in rural areas will drive subscribers to data plans and encourage upgrades to higher data plans, contributing to ARPU growth. Rural users, who rely primarily on mobile internet, will play a crucial role in this trend, unlike metro users who often have access to alternatives like Wi-Fi.
However, Crisil emphasized that maintaining the affordability of data plans will be essential to sustain the growth in rural data subscribers.
