Telecom Sector Growth Decelerates to Six-Quarter Low as Tariff Benefits Fade
The growth trajectory of India's telecommunications industry has moderated significantly, reaching its slowest pace in six quarters during the October-December period of fiscal year 2025-26. This deceleration occurred despite robust increases in data consumption and a steady expansion of home broadband subscriptions across the country.
According to recent analyst reports, the sector's total revenue climbed to ₹72,700 crore in the third quarter, marking a modest 2% increase from the previous quarter and a 9% rise compared to the same period last year. This growth rate represents a notable slowdown from the double-digit expansions witnessed over the preceding five quarters.
Divergent Views on Tariff Hikes Create Industry Uncertainty
Telecom operators currently find themselves at a crossroads regarding future pricing strategies. Reliance Jio has explicitly stated it has no immediate plans to implement further mobile tariff increases, instead expressing confidence in achieving organic growth through enhanced 5G adoption and value-added services.
"We are quite satisfied with the current traction—our average revenue per user increased by 1% this quarter," stated Anshuman Thakur, Head of Strategy at Reliance Jio, during a January earnings call. "Over the past year, ARPU has grown by approximately 5-5.5%. We possess specific mechanisms to enhance ARPU while delivering greater value to our customers, which remains our primary focus."
In contrast, competitors Bharti Airtel and Vodafone Idea have been vocal advocates for tariff revisions to improve their return on investment metrics. Vodafone Idea's Chief Executive Abhijit Kishore emphasized during a January analyst meeting that "any pricing intervention represents a decision for industry leaders, not challengers. We have consistently maintained that the sector requires price repair and will await leadership decisions before evaluating our position."
Financial Performance and Subscriber Dynamics
The industry's average revenue per user showed modest improvements across major players:
- Reliance Jio: ₹213.7 per month (1.1% quarterly growth)
- Bharti Airtel: ₹259 per month (1.1% quarterly growth)
- Vodafone Idea: ₹172 per month (3% quarterly growth)
Notably, Airtel's ARPU stands 21% higher than Jio's, even when accounting for Jio's enterprise and home revenue from fiber and 5G fixed wireless access services.
The sector added 10 million subscribers during the quarter, representing a 3.7% annual increase. Reliance Jio demonstrated the strongest subscriber growth at 1.8% quarterly, followed by Airtel at 1.2%, while Vodafone Idea experienced a 1.9% decline in its subscriber base.
Capital Expenditure Shifts and Future Outlook
Major telecom operators are reallocating their investment priorities, with mobile capital expenditure moderating for both Jio and Airtel. Both companies are now directing new investments toward home broadband infrastructure, enterprise services, and data center development—areas that present fresh growth opportunities beyond traditional mobile services.
Vodafone Idea has outlined ambitious capital expenditure plans totaling ₹45,000 crore over the next three years to enhance its network infrastructure and achieve sustainable subscriber growth, though this spending remains contingent upon successful fundraising from banking institutions.
Analysts from brokerage firm CLSA noted in a February 10 research note that "the anticipated next sector tariff hike remains pending, with Bharti Airtel leading our selections with projected 12-14% compound annual growth in India mobile revenue and EBITDA." The brokerage further indicated that Vodafone Idea would require tariff increases to achieve its targeted EBITDA of approximately ₹30,000 crore within three years.
5G Expansion and Digital Services Potential
The 5G subscriber base for Airtel and Jio has reached between 181-253 million users, representing 49-62% of their total data subscribers. Vodafone Idea has expanded its 5G service availability to 43 cities across 17 telecom circles as it works to catch up with market leaders.
Despite the current growth deceleration, industry analysts remain optimistic about the long-term prospects for India's leading telecom operators. BNP Paribas analysts observed that "while we continue to identify potential for further monetization of existing services, incremental opportunities will emerge from offering additional services to consumers beyond basic connectivity and content."
The sector's performance in the December quarter highlights the diminishing impact of tariff increases implemented in July 2024—when Reliance Jio led the industry with 12-25% price hikes after a two-year hiatus. With those benefits now fully realized, telecom companies must navigate divergent strategies for future growth in an increasingly competitive digital services landscape.
