According to a research note by Jefferies, the revenue generated by the Indian telecom sector is unlikely to grow beyond high-single digits in the coming quarters without an increase in tariffs. However, the presence of 207 million 2G users will drive upgrades and support average revenue per user (ARPU).

Meanwhile, the capital expenditure (capex) spending on 5G is expected to decelerate from the financial year 2025 onwards. This would lead to free cash flow (FCF) generation for the country’s private carriers after a 13-year gap, acting as a major catalyst for re-rating.

The revenue generated by the telecom sector has increased by over 9 per cent year-on-year in Q4 FY23 and Q1 FY24. However, Jefferies expects the next tariff hike to take place in 2024.