Indian telecom sector credit metrics set to improve in FY27 as capital expenditure intensity moderates across the industry. Bharti Airtel and Reliance Jio are completing their 5G expansion phases with declining capex, while Vodafone Idea accelerates spending over the next three years. India Ratings projects stronger free cash flow generation and improved credit profiles as capex pressures ease compared to 2024 and 2025. However, ARPU growth will slow to approximately 5 percent in FY27 due to high broadband penetration exceeding 75 percent and 5G adoption at 40 percent. Telcos will maintain returns on capital employed above 10 percent, but achieving 15 percent ROCE requires ARPU growth of 35 to 40 rupees, which may require additional tariff increases. The analyst noted that without another industry-wide tariff hike, organic ARPU growth will take longer to reach higher ROCE targets.
