Telecom price hikes to be more gradual as competition intensifies: UBS

Navin Killa, Head of Asia Pacific Telecommunications, Media and Internet at UBS India, said telecom tariff increases over the next three years will come at a slower pace than the market is pricing in.

UBS projects average revenue per user (ARPU) — the average monthly revenue a telecom operator earns per subscriber — to grow at a compound annual rate of 8 to 8.5% over the next three years, down from the 12 to 13% pace the sector delivered over the past five years.

"Having a slightly more competitive market with a slightly better funded operator is part of the thought process that drives our view that price increases from here will be more gradual than what they have been over the last four, five years," Killa said, speaking on the sidelines of the UBS India Conference 2026.

On the funding side, Killa addressed reports that a State Bank of India-led group of lenders is weighing a large fundraise for Vodafone Idea. He said the move follows the government's decision in February 2026 to defer and reduce the company's Adjusted Gross Revenue (AGR) dues — payments telecom operators make to the government as a share of revenue — which improved the balance sheet position of the operator in question.

"This funding itself should not be a surprise. It was widely talked about," Killa said, noting there was a market expectation that the fundraise would be addressed by now.

Killa said the capital expenditure gap between the two larger telecom operators and the third player will narrow once the funding comes through, though the gap will remain wide. He said the network catch-up will take time.

On ARPU, Killa broke down the two drivers of growth. Organic upgrades — customers moving from 2G to 4G networks or from prepaid to postpaid plans — typically add about 5% to ARPU each year, and UBS expects that trend to continue. The rest of the growth has historically come from price increases, contributing another 6 to 7% a year over the last five years.

"Our ARPU expectations over the next 3 years are about 8 to 8.5% CAGR, with the same 5% organic and 3 to 3.5% coming from price increases," Killa said. He added that a 10% price increase typically translates into only a 6 to 7% rise in ARPU, since the full increase does not flow through to revenue.

Killa also addressed concerns around Bharti Airtel, which has underperformed this year. Without commenting on individual stocks, he said sector-wide concerns over aggressive tariff expectations have been factored into the market more over the past six months. He pointed out that the industry has historically raised prices every 18 to 24 months, and the last major increase was in July 2024 — meaning the sector has now gone more than two years without a hike, longer than the usual cycle.

Turning to quick commerce, Killa said scale and discounting are linked rather than separate strategies, since larger operators can negotiate better pricing terms and pass on value to customers. He said scale becomes more important as the market expands beyond India's top 10 to 15 cities into more than 200 cities, and as the user base grows beyond 40 to 50 million.

"Scale around assortment, scale around dark stores, scale around density of infrastructure, scale around the delivery partner network — all of that does make sure that scale is a very important driver of growth," Killa said.

For the full interview, watch the accompanying video

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