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Slightly weaker 1Q due to higher SG&A and network opex; reported revenue declines likely due to change in ICR rates

• Overall 1QFY26 reported revenue at INR22.6b (+18% YoY, ~4% below our estimate) declined ~1% QoQ, likely due to a change in inter-circle roaming (ICR) rates. Customer revenue grew 3% QoQ to ~INR21.5b and was broadly in line with estimates.
• EBITDA at INR12.1b (+33% YoY, 4% miss) declined ~1% QoQ due to higher network opex (+10% QoQ) and SG&A costs (+26% QoQ).
• Reported EBITDA margin expanded ~25bp QoQ to 51.3% (+545bp YoY, 15bp below our estimate) and remained significantly below 58.1% (up 30bp QoQ) for Bharti’s India operations (ex-Indus).
• Depreciation and amortization remained flat QoQ at INR5.3b (+6% QoQ), while net finance cost declined ~13% QoQ (-12% YoY) to INR1.1b.
• Reported PAT came in at INR3.9b. Adjusted for exceptional items in earlier quarters, PAT at INR3.9b declined 16% QoQ (but up 2x YoY) and came in 5% below our estimate, due to a miss on EBITDA.

Capex normalized; net debt declines further ~INR9b driven by robust FCF generation

• Similar to Bharti, overall capex fell ~47% QoQ to INR2.3b (-29% YoY).
• Hexacom’s overall net debt (ex-leases) declined further ~INR8.8b QoQ to INR28.1b (vs. INR36.9b QoQ). Including the impact of leases, Hexacom’s consolidated net debt declined by ~INR9.5b to INR63.1b (vs. INR72.6b QoQ).
• Net debt (ex-leases) to EBITDAaL declined further to 0.65x (vs. 0.87x QoQ, vs. 1.35x for Bharti’s India SA business).
• Hexacom’s consolidated free cash flow (after leases and interest payments) improved to INR8.9b (vs. INR6.6b QoQ), driven by better operational cash flows and favorable working capital changes.

Wireless: Optical decline in revenue due to likely adjustment in ICR rate; core revenue growth in line with estimates, EBITDA impacted by higher SG&A and network opex

• Hexacom’s wireless ARPU grew 2% QoQ (similar to Airtel) to INR246 (20% YoY, vs. our est. of INR245), driven by subscriber mix improvements and one extra day QoQ.
• Hexacom reported modest 17k paying net adds (vs. 515k net adds QoQ and our est. 265k net adds) and contributed just ~1% of Bharti’s 1QFY26 subscriber net adds (vs. ~7.8% share in Airtel’s paying subs base).
• The subscriber mix continued to improve as Hexacom added 283k smartphone net adds QoQ. Hexacom’s share of Bharti’s 4G/5G net adds was robust at ~7.2% (though lower vs. 10% QoQ and ~7.8% share of Airtel’s 4G subscriber base). The share of data subs in Hexacom’s mix improved further ~95bp QoQ to 77.6%, but remained below Airtel’s 78.5% (+70bp QoQ).
• Hexacom’s reported wireless revenue declined ~1.5% QoQ (vs. +2.9% QoQ for RJio, including FTTH and Airtel’s India wireless) to INR21.9b (+18% YoY, ~3.5% miss) due to lower contribution from in-roamers.
• Hexacom’s customer revenue grew ~3% QoQ (similar to QoQ growth rates for RJio, including FTTH and Airtel’s India wireless) to INR20.8b (+23% YoY, in line).
• Wireless EBITDA at INR11.9b (+34% YoY, 3% below our estimate) was flat QoQ (vs. +5.3%/+3.3% QoQ R-Jio, including FTTH/Airtel) due to a significant increase in network opex (+10% QoQ) and SG&A (+26% QoQ).
• Wireless EBITDA margins improved ~60bp QoQ to 54.4% (+640bp YoY, vs. +125bp QoQ to 54% for RJio), better than 20bp QoQ improvement for Airtel (59.4%).
• Incremental margins on YoY basis were robust at 90% (vs. 63%/77% for RJio/ Bharti), driven by better flow-through of tariff hikes and continued market share gains.
• Similar to normalization in capex for Bharti’s India wireless segment, Hexacom’s wireless capex also declined ~66% QoQ to INR1.2b (-56% YoY).

Homes and Offices: Net subscriber additions remain elevated; margins contract (vs. expansion for Bharti)

• Hexacom’s Homes BB subs base reached ~0.5m (+56% YoY) as net adds remained elevated at ~54k (vs. 53k QoQ). Hexacom accounted for ~5.7% of Airtel’s Homes BB net adds (vs. ~4.6% share in Airtel’s Homes BB subscriber base).
• However, similar to Airtel, reported Homes ARPU decline continued, with a further ~1% QoQ dip to INR485/month (-6% YoY, vs. ~1% QoQ dip for Airtel to INR537/month).
• Homes and Offices revenue was up ~11% QoQ at INR0.8b (+38% YoY, in line) and was better than ~8% QoQ growth for Airtel.
• Homes and Offices EBITDA at INR0.25b (15% below) was up ~7% QoQ (+38% YoY, vs. 8% QoQ growth for Airtel), as margins contracted ~110bp QoQ to 31.8% (-150bp YoY). Comparatively, Airtel’s Home BB margins expanded ~15bp QoQ to 50%.
• Capex in Homes Business surged ~74% QoQ to INR1b (up ~3x YoY).

Other highlights: Data engagement remains ahead of Airtel’s India wireless business

• Data volume for Hexacom surged 8% QoQ (vs. 6% QoQ in 4QFY25, +12%/8% QoQ R-Jio including FTTH and Airtel India), driven by boost from IPL.
• Data usage per sub improved to 29.4GB/month (vs. 27.7GB QoQ, 37GB reported by R-Jio including FTTH and higher than 26.9GB for Airtel on pan-India basis).
• Voice usage on network declined ~2% QoQ (+1% QoQ in 4QFY25, flat/-1% QoQ for R-Jio and Airtel), with minute of usage (MoU) per subscriber moderating slightly to 1,107mins/month (vs. 1,139 mins QoQ, ~1,007 mins for R-Jio, and slightly lower vs. 1,143 mins for Airtel on pan-India basis).
• Hexacom’s tower count reduced by seven QoQ (vs. 162 additions in 4QFY25) to 26.5k towers. Revenue per site declined ~2% QoQ to INR275k/month (+15% YoY, vs. +2% QoQ to INR267k for Airtel).

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