Telecom companies may push their average revenue per user (ARPU) higher by 25% over the next 6-12 months to attain a sustainable return on capital employed (RoCE) of 10%, said a Crisil report. According to Crisil this was given their abysmally low returns at present and increased liability on account of adjusted gross revenue (AGR) dues.

"Though operators did go for a significant tariff hike in December 2019, intense competitions over the past three years, heavy capital expenditure (capex) to roll out 4G networks, and pending AGR liabilities have weakened their balance sheets. Therefore, an increase in ARPU will be essential to strengthen credit profiles," CRISIL has stated. It adds that Tariff hikes, rising 4G adoption and increasing data consumption by adopting content-led bundled pricing strategies could help boost ARPU growth.

"Our base case assumes monthly average revenue per user reaching Rs 175-180 by next fiscal from Rs 140 in the first half of the current fiscal so as to generate a sustainable RoCE of 10%. Of course, this will depend on competitive intensity, but it can crank up industry revenue to over Rs 2 lakh crore next fiscal, or a third more than the Rs 1.5 lakh crore seen in fiscal 2020, despite muted subscriber growth." Says Sachin Gupta, Senior Director, CRISIL Ratings.

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