New Delhi— Rising internet adoption and surging data consumption in rural India are becoming key drivers of revenue growth for Indian telecom operators, according to a report released Tuesday by Crisil Ratings. To tap into this expanding market, telecom companies are ramping up investment in rural connectivity, which is expected to significantly boost their subscriber base and returns.
Over the four years ending December 31, 2024, internet penetration in rural India jumped from 59% to 78%, outpacing urban areas, which rose from 77% to 90%, the report noted. This upward trajectory is expected to continue, with rural internet access projected to grow another 4–5 percentage points by the end of fiscal 2026. Key contributors to this growth include increasing use of digital payments, online communication, social media, content streaming, and e-commerce.
Despite being more price-sensitive, rural consumers have shown resilience in the face of mid-2024 tariff hikes, underscoring their growing dependence on mobile internet services. The rise in rural data usage is being fueled by expanding network coverage, affordable smartphones, and competitively priced data plans—especially in telecom circles B and C, which account for roughly 70% of the rural subscriber base.
These regions have seen data consumption grow at a compound annual rate of 19–22% over the past four years, outpacing the 17–19% growth in metropolitan areas. The expansion of 4G networks in underpenetrated rural zones is expected to sustain this trend, pushing average revenue per user (ARPU) higher in the coming quarters.
“Industry ARPU is expected to increase by Rs 20–25 to reach Rs 225–230 by the end of this fiscal, assuming stable tariffs,” said Anand Kulkarni, Director at Crisil Ratings. “Rural subscribers will likely contribute 55–60% of the incremental ARPU growth.”
In line with this trend, telecom providers are rolling out tailored data plans and investing in spectrum acquisition and infrastructure upgrades in rural regions. In the June 2024 spectrum auction, operators acquired significant bandwidth in circles B and C. Additionally, independent tower companies are planning capital expenditures of Rs 8,000–9,000 crore in FY26, much of which will be focused on rural expansion.
“The targeted investments in rural networks and spectrum, coupled with growing ARPU, are set to lift telecoms’ return on capital employed from 10% in FY25 to around 12% in FY26,” said Mohini Chatterjee, Team Leader at Crisil Ratings. “Given that about 75% of telecom costs are fixed, even a modest rise in ARPU can have a substantial impact on earnings.” (Source: IANS)
