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Aggregate revenue growth for the three private telcos moderated to ~10% YoY in Sep’25 (from ~14-16% over the last four quarters), as the benefit of the Jul’24 tariff hike is now in the base. Further, with muted subscriber trends over the past few quarters, we believe the aggregate YoY revenue growth could decline to single digits in Dec’25. Given the low inflation and no major state elections in the next couple of months, we believe the time is ripe for telcos to undertake the next tariff hike. We build in a tariff hike of ~15% (or ~INR50/cycle on 28 day 1.5GB/d plan) in Dec’25.

Why we believe ~15% tariff hike could be on the cards in Dec’25

Private telcos have undertaken three rounds of smartphone tariff hikes in the last six years. Telcos undertook a 30%+ blended tariff hike in Dec’19, in the immediate aftermath of the adverse AGR verdict, which was followed by a pause of almost two years due to COVID-19. Telcos then raised headline tariffs by 20%+ in Dec’21, which was followed by a pause of almost two and a half years. We believe the third tariff hike was delayed by six months due to high inflation and general elections. In the most recent tariff rejig (Jul’24), telcos raised blended tariffs by ~17%, with the pricing for the 28-day 1.5GB/day plan increasing by ~INR50.

With the Jul’24 tariff hike in the base, revenue growth for telcos moderated to ~10% YoY in 2QFY26 and is set to decline further in Dec’25 in the absence of another tariff hike. With low inflation and no major elections over the next couple of months, we believe telcos could revert to a Dec tariff-hike cycle in CY25. The quantum of the headline tariff hike will likely be ~INR50/cycle on the 28-day 1.5GB plan (currently priced at INR299/INR349 for RJio/Bharti), which translates to ~15% increase, though the flow-through will vary across telcos depending on subscriber mix.

Plan tariffs up ~75-100% in last six years; still further room for tariff hikes

Driven by three rounds of smartphone tariff hikes (in Dec’19, Dec’21, and Jul’24), pricing for RJio’s popular 84-day 1.5GB/d and 28-day 1.5GB/d plans has almost doubled (95-100%) over the last five years, while pricing for Bharti and Vi’s comparable popular plans have increased by ~75-90% over the same period. Despite the three rounds of tariff hikes, we note that telco spends as a % of nominal GDP has inched up to 0.86% in Sep’25 (vs. 0.71% in Sep’19) and remains significantly lower than ~1.4% in Jul’16 (just before RJio’s launch). Further, we note that data costs in India remain among the lowest globally, even as consumption is among the highest, which provides runway for further tariff hikes. Bharti has been making a case for ARPU to reach INR300; we estimate Bharti’s popular 84-day 1.5GB/d plan ARPU (most correlated with Bharti’s blended ARPU) would cross the ~INR300 benchmark with the next round of tariff hike.

Bharti has been the biggest beneficiary of the industry-wide tariff repair

In line with the doubling of popular plan prices over the last six years, India’s quarterly telecom sector revenue has grown ~120%+ to INR737b (~14% CAGR over Sep’19-Sep’25). We note that Bharti and RJio had similar ARPU of ~INR128 in Sep’19 (i.e. before the start of the tariff hike cycle). However, the tariff hike flow-through, and the resultant wireless revenue and EBITDA growth, has been divergent across the three telcos.

• Driven by tariff repair, an improved subscriber mix (non-data to data, prepaid to postpaid), and sharp hikes on minimum recharge packs, Bharti has been the biggest beneficiary of tariff repair, with ARPU doubling to INR256 over the last six years and ~17% CAGR in quarterly wireless revenue (vs. 10-11% CAGR in popular plan pricing) over Sep’19 to Sep’25.
• Despite slightly higher increases in popular plan tariffs (~12% CAGR vs. 10-11% for Bharti/Vi), RJio’s implied wireless ARPU has risen relatively modestly, by ~60% (or at ~8% CAGR) over Sep’19-Sep’25. However, with RJio’s continued subscriber market leadership, implied wireless quarterly revenue has grown ~120%+ (or ~14% CAGR) during the same period.
• Given its relatively inferior subscriber mix, Vi’s ARPU rose modest ~56% over the same period (on a lower base) to INR167. Further, due to continued subscriber losses, Vi’s quarterly wireless revenue is ~2% lower in Sep’25 (vs. Sep’19, modest growth on a like-for-like basis, when adjusted for IUC revenue).
• Driven by superior tariff hike flow-through, Bharti and RJio have gained ~900 and ~700 bp revenue market share (RMS), respectively, over the last six years, while Vi has lost ~1,380bp RMS during the same period.
• Supported by robust ~75% incremental margins, Bharti/RJio have witnessed robust ~27%/22% quarterly reported EBITDA CAGRs over Sep’19-Sep’25. On the other hand, Vi’s reported EBITDA has clocked relatively modest ~6% CAGR over the same period.

GoI relief for Vi and Bharti potentially closing in on RMS #1 could be key headwinds to impending tariff hikes

While our base case assumes a ~15% headline tariff hike from Dec’25, we highlight several factors that could delay this. First, the GoI is working on a relief package for Vi to ensure 3+1 market structure in the Indian telecom industry, aiming to maintain a competitive market and keep telecom services affordable. While tariffs remain under forbearance, a significant relief on AGR dues for Vi could lead to a delay in potential tariff hikes. Further, as noted above, Bharti has consistently been the biggest beneficiary of past tariff hikes and has closed the gap in RMS with RJio by ~190bp since Jun’24. The gap between the two now stands at 2.5% (was as low as 2.1% in Dec’24 as RJio has been a delayed beneficiary of the tariff hikes). We believe that if tariff hikes are announced in Dec’25, Bharti could significantly close the gap with RJio on RMS, potentially threatening to overtake RJio for the #1 position by 1HCY26 (roughly similar to the JPL IPO timeline). Given this, RJio may not be comfortable with the #2 position on RMS heading into the IPO, which could delay the tariff hikes.

Valuation and view

• Given the consolidated market structure in the Indian telecom industry, one of the highest data consumptions globally, yet among the lowest ARPUs, and the inadequate returns generated by telcos, we expect tariff repair to continue.
• We build in a ~15% (or INR50/cycle in base pack) smartphone tariff hike in Dec’25, which should take Bharti closer to the stated goal of INR300 ARPU.
• We believe there is limited scope of tariff hikes on minimum recharge packs (INR199/28 days), and while tariffs remain under forbearance, we believe taking a 10%+ headline tariff hike every alternate year could become difficult.
• However, a change in the tariff construct to usage-based plans (vs. the current unlimited daily data plans) could lead to greater monetization from higher data consuming users and provide further ARPU upside for telcos.
• We remain structurally positive on the telecom sector and continue to prefer Bharti (BUY, TP INR2,365) and RJio (RIL, BUY, TP INR1,765).

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