JM Financial reaffirmed its positive view Bharti Airtel, anticipating a 13% compound annual growth rate (CAGR) in the industry’s average revenue per user (ARPU) over the next three to five years.
This growth is expected to be largely driven by regular tariff hikes and multiple premiumisation strategies, coupled with improved visibility of tariff increases due to Jio’s anticipated IPO in the first half of calendar year 2026 (1HCY26).
The upcoming initial public offering (IPO) by Jio is expected to significantly impact the telecom market dynamics. JM Financial expects a tariff hike of approximately 15% around November-December 2025, which will be part of regular increases thereafter. This aligns with the government’s intent to ensure a ‘3+1’ player market structure. Such a move is seen as imperative for Jio to justify its substantial 5G capital expenditure, it said.
Bharti Airtel’s financial prospects are promising, with its India wireless ARPU projected to grow at around 10% CAGR, reaching over Rs 310 by FY28. This growth is expected to drive a consolidated EBITDA CAGR of approximately 16% from FY25 to FY28. Furthermore, Bharti’s free cash flow (FCF) is anticipated to rise significantly, enabling it to achieve a net cash position by FY30, JM noted.
The telecom industry’s structural shift to a ‘pay as you use’ model is expected to further fuel ARPU growth. This change is anticipated to benefit customers who consume more data, as they will contribute more to revenue. Such transformations are seen as pivotal for long-term sustainability and enhanced profitability in the sector, the brokerage said.
On the competitive front, Jio continues to dominate the 5G fixed wireless access (FWA) market, holding a 78% share. The company’s aggressive rollout of JioAirFiber has significantly driven this growth, with strong additions in home broadband subscriptions. This expansion is complemented by Bharti’s efforts, albeit at a smaller market share in comparison, it said.
As for the broader implications of Jio’s IPO, analysts suggest that the increased capital requirements due to the IPO will likely drive further tariff hikes. Such increases are essential not only for Jio but also for maintaining the competitive balance in the industry, ensuring the viability of players like Vodafone Idea (VIL).
In terms of investment recommendations, JM Financial maintains a ‘HOLD’ rating on Indus Tower (Target Price: Rs 340) due to risks associated with a potential duopoly market. The firm has also reiterated its ‘BUY’ rating on Tata Communications (Target Price: Rs 2,000), expecting robust growth in its digital portfolio driven by improved profitability.
The potential for continued stake sales by Bharti Airtel’s promoters, including Singtel and the Mittal family, could pose a medium-term overhang on the stock. However, the overall outlook remains positive due to expected ARPU growth and strategic moves in the sector.
The brokerage firm has a ‘BUY’ rating on Bharti Airtel with a target price of Rs 2,240 and a positive view on Reliance Jio? It has a ‘BUY’ rating on Reliance Industries with a target price of Rs 1,700. JM has suggested a ‘HOLD’ rating on Vodafone Idea with a target price of Rs 9.
The analysis by JM Financial underscores a substantial opportunity for 5G monetisation, with Bharti and Jio already seeing 5G subscriber penetration at 42%. This presents a significant potential for future growth, although currently limited to tariff hikes and premiumisation strategies.
Overall, the market dynamics in the telecom sector appear poised for transformation, driven by strategic tariff adjustments and the impending Jio IPO. These developments are set to influence stakeholder decisions and shape the competitiveness of telecom players in India. Additionally, the government’s push for a ‘3+1’ player market is likely to ensure that the sector remains competitive and sustainable, it said.
Moreover, the strategic focus on 5G and broadband expansion highlights the sector’s commitment to innovation and customer satisfaction. As Bharti and Jio continue to expand their 5G networks, the potential for increased data consumption and higher ARPU becomes evident, the brokerage noted.
This trend is expected to continue, with both companies leveraging their technological advancements to capture a larger share of the market. The emphasis on premiumisation and tailored customer plans further underscores the competitive nature of the telecom industry, as companies strive to offer differentiated services to attract and retain subscribers.