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1QFY26 preview: Healthy quarter led by steady ARPU growth and subs gains

Bharti is expected to register 2.6% QoQ and 3.1% QoQ growth in its India wireless revenue and EBITDA respectively, led by robust MBB subs gains (at ~5.5mn) and as ARPU is likely to improve 1.6% QoQ (to INR 249) due to ongoing healthy upgrades to smartphone/post-paid plans and 1 more day QoQ in 1QFY26 (while Jul'24 tariff hike has completely passed through its ARPU by end-3QFY25). Similarly, BHL is expected to register 2.8% QoQ and 3.9% QoQ growth in its revenue and EBITDA respectively due to healthy MBB subs gain (at 0.4mn) and 1.6% QoQ ARPU improvement (to INR 246). We expect Jio’s ARPU to improve 1.8% QoQ to ~INR 210, aided by upgrades, 1 more day QoQ in 1QFY26 and residual pass-through of the Jul'24 tariff hike, while its subs gains will be robust at 7.2mn (vs. 6.1mn in 4QFY25). Hence, Jio’s revenue and EBITDA is likely to grow by 2.7% and 3.5% QoQ. Separately, VIL’s revenue, reported EBITDA and cash EBITDA are expected to grow by 1.1%, 1.8% and 3.5% QoQ respectively as ARPU is likely to improve 1.6% QoQ to INR 167 due to improved subs mix and 1 more day QoQ in 1QFY26, though it will be partly offset by net subs loss of ~0.9mn (though MBB subs likely to grow by ~1mn). We expect net tenancy additions to remain robust for Indus Towers, driven by VIL’s network expansion and Bharti’s rural rollouts; reported EBITDA could decline 2.7% QoQ while adjusted EBITDA may grow 2.5% QoQ, partly offset by seasonally higher power costs. Separately, we expect TCOM’s revenue to grow 1.8% QoQ to ~INR 61bn while its EBITDA is likely to recover 3.4% QoQ to INR ~11.6bn in 1QFY26, on a low base of 4QFY25 which was adversely impacted by multiple one-offs. We reiterate BUY on Bharti (revised TP INR 2,250); we also maintain our BUY on BHL (revised TP INR 2,000) and our positive view on Jio. We maintain HOLD on VIL and Indus, and reiterate BUY on TCOM on expectation of improvement in profitability of the digital portfolio segment.

* Jio’s EBITDA to grow 3.5% QoQ on robust subs gain and 1.8% QoQ growth in ARPU to INR 210 (due to upgrades ,1 more day QoQ in 1QFY26 and residual flow-through of Jul'24 tariff hike): Jio’s ARPU is expected to grow 1.8% QoQ to INR 210 (from INR 206) due to 1 more day QoQ in 1QFY26, upgrades and residual flow-through of Jul'24 tariff hike (in its 4QFY25 earnings concall, the management shared that the full impact of the Jul’24 tariff hike is likely to be fully visible by 1QFY26). Further, Jio’s net subs gain (including FTTH/FWA) is likely to be robust at 7.2mn in 1QFY26 3mn (added 5.3mn overall subs in Apr-May’25 as per TRAI’s data; vs. subs gain of 6.1mn in 4QFY25). Strong traction in FTTH/FWA additions is likely to continue with addition of ~2mn subs in 1QFY26. Hence, we expect 2.7% QoQ growth in Jio’s standalone revenue to INR 312bn and 3.5% QoQ growth in EBITDA to INR 168bn. However, its standalone PAT is likely to be flat QoQ at INR 66.4bn in 1QFY26 due to full quarter impact of higher depreciation and amortisation (at INR 64.8bn in 1QFY26 vs INR 59.3bn in 4QFY25) on account of capitalisation of 5G spectrum and net fixed asset towards end-4QFY25 (net fixed asset capitalisated by ~INR 390bn and spectrum capitalised by ~INR 810bn at end 4QFY25) – Exhibit 1.

* Bharti India wireless EBITDA to grow 3.1% QoQ due to strong MBB subs gain and as ARPU is likely to improve 1.6% QoQ to INR 249 (due to upgrades and 1 more day QoQ in 1QFY26): Bharti is expected to report robust mobile broadband (MBB) subs addition, at 5.5mn in 1QFY26 (vs. 6.6mn in 4QFY25) while its overall subs addition is expected to be slightly lower at 2.3mn (added 0.5mn overall subs in Apr-May’25 as per TRAI’s data). Further, its wireless ARPU is likely to grow 1.6% QoQ to INR 249 (vs. INR 245 in 4QFY25) due to upgrades and improved subs mix and aided by 1 more day QoQ in 1QFY26 (while Jul'24 tariff hike has completely passed through its ARPU by end 3QFY25). Hence, we build in 2.6% QoQ growth in India wireless business revenue to INR 273bn, and 3.1% QoQ rise in EBITDA to INR 162bn. However, the enterprise business is expected to continue to witness sharp decline of 12% QoQ in EBITDA due to 3% QoQ revenue decline (as it continues to move away from commoditised low-margin businesses) and normalisation of margin, while FTTH is likely to witness healthy subs gains (~750k subs addition QoQ) and Airtel Africa could see full quarter impact of the tariff hike undertaken last quarter in Nigeria – Exhibit 3.

* BHL’s EBITDA also to grow 3.9% QoQ due to healthy MBB subs gain and as ARPU is likely to improve 1.6% QoQ to INR 246 (due to upgrades and 1 more day QoQ in 1QFY26): BHL’s (Bharti Hexacom Ltd) ARPU is likely to grow 1.6% QoQ to INR 246 (vs. INR 242 in 4QFY25) due to upgrades and improved subs mix and aided by 1 more day QoQ in 1QFY26 (while Jul'24 tariff hike has completely passed through its ARPU by end-3QFY25). It is also likely to report healthy net wireless subs gain of ~0.3mn in 1QFY26 (vs. ~0.5mn in 4QFY25) and MBB subs addition of ~0.4mn (vs. ~0.7mn in 4QFY25). Hence, we expect its revenue to grow by 2.8% QoQ to INR 23.5bn and EBITDA to improve by 3.9% QoQ to INR 12.6bn in 1QFY26 – Exhibit 4.

* VIL’s EBITDA to grow 1.8% QoQ as ARPU is likely to improve 1.6% QoQ to INR 167 due to improved subs mix and 1 more day QoQ in 1QFY26, though it could be partly offset by net subs loss of ~0.9mn: We expect its net subs loss trend to moderate, with net subs base declining by ~0.9mn in 1QFY26 (declined by 1.6mn in 4QFY25 and has declined by 1.5mn-5mn per quarter over the last few quarters) while adding ~1mn MBB subs (had added 0.4mn MBB subs in 4QFY25), aided by its ongoing network expansion rollouts. Further, its ARPU is likely to grow by 1.6% QoQ to INR 167 (vs. INR 164 in 1QFY26) due to upgrades and improved subs mix and aided by 1 more day QoQ in 1QFY26 (while Jul'24 tariff hike has completely passed through its ARPU by end-3QFY25). Hence, we expect its revenue to grow 1.1% QoQ to INR 111bn, reported EBITDA to be higher 1.8% QoQ at INR 47.4bn and Pre-IND AS EBITDA (or cash EBITDA) to be higher 3.5% QoQ at INR 24bn in 1QFY26 – Exhibit 6.

* Net tenancy additions for Indus to remain strong driven by Bharti’s rural expansion and VIL rollouts; reported EBITDA to decline 2.7% QoQ while adjusted EBITDA to grow 2.5% QoQ: We build in ~7k net tenancy additions in 1QFY26 for Indus Towers vs. ~8.2k in 4QFY25 (excluding tenancy additions due to acquisition of 10,380 macro towers from Bharti in 4QFY25), driven by Bharti’s continued rural expansion and VIL network expansion rollouts. We expect tower additions at ~3.6k vs. ~4.3k in 4QFY25 (excluding acquisition of 10,380 macro towers from Bharti in 4QFY25), primarily on account of Bharti’s continued rural network expansion. Further, we assume that the average rental per tenancy (ARPT) will improve 0.8% QoQ with the full quarter benefit of higher ARPT on tower portfolio acquired from Bharti (largely single tenancy towers), partly offset by negative impact of sharing discount due to tenancies from VIL on account of its ongoing network expansion rollouts (largely forming second tenancy on existing towers). Hence, revenue is likely to grow 4.8% QoQ to INR 81bn, also aided by seasonally higher energy revenue in 1QFY26. However, reported EBITDA might decline 2.7% QoQ as we build NIL provision for doubtful debt write-back (vs. recovery of ~INR 2.2bn of past dues from VIL in 4QFY25) given VIL has paid all of its undisputed past dues; while adjusted EBITDA could improve ~2.5% QoQ to INR 42.8bn in 1QFY26. However, EBITDA is likely to be impacted slightly by seasonally higher energy costs, which could lead to negative EBITDA margin of 7% in 1QFY26 (vs. negative 5% in 4QFY25). Separately, along with the 1QFY26 results, the Indus board can declare additional dividend/buy-back of ~INR 71bn in FY25 or ~INR 27/share based on its current dividend policy of paying 100% of FCF (FY25 FCF of INR 98.5bn less INR 26.4bn already paid in 1HFY25, with 2,638mn shares outstanding). Exhibit 7.

* TCOM’s EBITDA to recover 3.4% QoQ in 1QFY26, on a low base of 4QFY25 that was adversely impacted by multiple one-offs: TCOM’s core connectivity revenue is expected to grow 1% QoQ while digital portfolio revenue is likely to grow 3.2% QoQ in 1QFY26. Hence, we expect overall revenue to grow 1.8% QoQ to ~INR 61bn. Further, EBITDA is likely to recover 3.4% QoQ to INR ~11.6bn in 1QFY26, on a low base of 4QFY25 which was adversely impacted by multiple one-offs – Exhibit 8.

* Reiterate BUY on Bharti; also maintain our BUY on BHL and positive view on Jio: We have raised Bharti’s FY26-28 consolidated Revenue/EBITDA estimates by 1-2%, building in slightly higher ARPU growth factoring in 1QFY26 estimate. Further, we have also slightly reduced our WACC assumption (from 10.8% to 10.6% factoring in reduction in India’s risk-free rate); hence, our TP has been revised upwards to INR 2,250 (from INR 2,050) – Exhibit 18. As detailed in our Deep-Dive note (Biggest beneficiary of structural ARPU growth story), we reiterate our BUY rating on Bharti Airtel (1 year TP of INR 2,250, and 3-year TP of INR 3,040 implying a 3-year IRR potential of ~15% — Exhibit 23-24) as we believe industry’s wireless ARPU will grow at ~12% CAGR in the next 3-5 years given the consolidated industry structure, to ensure a ‘3+1’ player market and higher ARPU requirement for Jio not only to justify its significant 5G capex but also given its potential listing plans. Bharti is the biggest beneficiary of higher tariffs given the sticky and premium quality of its subs. We have also raised BHL’s FY26-28 consolidated Revenue/EBITDA estimates by up to 5%, building in slightly higher long-term ARPU growth and slightly higher EBITDA margin. Moreover, we have also increased EV/EBITDA multiple to 15.0x (from 14.0x); hence, our TP has been revised upwards to INR 2,000 (from INR 1,795). We reiterate our BUY on BHL (1-year TP of INR 2,000 and 3-year TP of INR 2,715 implying a 3-year IRR potential of 12% — Exhibit 27-28) as we see BHL as a midcap pure-play on the wireless ARPU growth story. We also maintain our positive view on Jio — Exhibit 31).

* Maintain HOLD on VIL and Indus; reiterate BUY on TCOM on expectation of improvement in profitability of digital portfolio segment: We maintain HOLD on VIL (unchanged TP of INR 9). Key monitorables that can pose upside risks to our estimates/valuation are: a) further relief from government dues either via partial waiver of AGR dues and/or allowing surrender of pre-2022 spectrum, conversion of more dues to equity and extension of moratorium; b) multiple sharp tariff hikes that can result in VIL’s blended ARPU being significantly above our estimate of INR 183/207/229 in FY26/27/28 vs. INR 164 in 4QFY25; and c) VIL’s subscriber growth being significantly above our assumption of 1% growth p.a. at 200/202/204mn in FY26/27/28 vs. 198mn in 4QFY25 (Exhibit 33-34). However, there could be downside risk to our estimates/valuation if VIL is not able to arrest its subscriber decline and/or tariff hikes are lower than expected. Further, we maintain HOLD on Indus Tower (unchanged TP of INR 370) due to risk of a duopoly market (Exhibit 36-37). Separately, we reiterate BUY on TCOM with unhanged TP of INR 2,000 (Initiation note - Pivoting from Connectivity to CommTech) as we expect robust data segment EBITDA growth over FY25–28E driven by strong growth in its digital portfolio, led by improvement in its profitability (Exhibit 38-39).

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