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2QFY27 was an eventful quarter for all telecom operators, with Bharti Airtel (Bharti) withdrawing low-value prepaid plans, a consortium of lenders led by SBI agreeing to provide $3.5bn debt funding to Vodafone Idea (Vi), and Reliance Jio (RJio) progressing on its planned listing. While Bharti withdrew its low-value plans, there was no follow up by other players and we are still awaiting tariff increase by the sector. Consequently, we build in 2.3%, 2.3%, and 1.0% qoq ARPU increase for Bharti, Bharti Hexacom (Hexacom), and RJio, respectively. On the other hand, Vi has conducted a rebranding exercise and is offering complementary international roaming for certain packs to boost the high-end subscriber base. Subscriber addition for the industry is steady, but Vi has now started seeing gain in subscriber base. We maintain BUY on Indus Towers (Indus) with TP of Rs475. Indus is currently trading at 6.0x FY28E EV/EBITDA. Bharti’s India business and Hexacom trade at 11.3x and 10.3x FY28E EV/EBITDA. We maintain REDUCE Bharti/Hexacom and TP of Rs2,000/1,600, respectively.

Bharti ARPU premiumization at play

We expect 3.1% qoq revenue growth for Bharti, with stable EBITDA margin. Bharti withdrew four prepaid plans (of Rs299, Rs579, Rs619, and Rs649), which offered lower data allowance (1-2GB per day) to upgrade customers to higher-value packs. With this, we build in 2.3% qoq ARPU increase for Bharti and Hexacom to Rs270 and Rs265, respectively. Consensus continues to cut FY28 ARPU for Bharti – it now stands at Rs304, vs Rs306 after the 1QFY27 results. We expect 2mn qoq subscriber addition, taking the total subscriber base to Rs378mn. We estimate EBITDA margin will be stable at 56.8% for Bharti Airtel. We build in 70bps qoq margin improvement for Bharti Hexacom to 53.4%

Air Africa business, we build in 3% qoq subscriber growth at 195mn and a 1.0% qoq ARPU increase driving 22% yoy revenue growth. We expect EBITDA margin to improve by 20bps to 48.3%. Airtel Africa remains a major long-term growth driver for Bharti due to low smartphone and low broadband connection penetration (45%) in Africa. Airtel Money has filed for an IPO in London and is in the process of listing on 14-Oct-26, targeting valuation of $7bn to raise $703mn. We do not anticipate any material change in Bharti’s valuation as a result of Airtel Africa contributing only 10.6% of overall value. Airtel Africa, the holding company of Airtel Money, will continue holding the controlling stake (78%)

Indus Towers: Large customer renewal a key overhang

We build in 3.1% yoy revenue growth for Indus Towers. We estimate 2,500/3,300 tower/tenancy additions, leading to the number of towers increasing to 270k cumulatively and a stable tenancy ratio of 1.62x. We anticipate EBITDA margin to improve by 100bps to 54.2%, supported by normalization of energy margin to -4.0% from -4.6% in 1QFY27. The street is concerned about the renewal of towers of a large customer; we will watch for management commentary on this. The company is also relying on its Africa foray for acceleration in overall growth which would be a key monitorable.

Outlook and valuations Unlike global valuations

Indian telecom operators trade at a premium to tower companies. Hence, Indian tower companies (like Indus Towers) provide an attractive riskreward – 6x/5.6x FY28E/FY29E EV/EBITDA. We maintain BUY rating on Indus Towers with TP of Rs475. The street continues to rationalize its ARPU estimates, which have come down 4.4% over the last year. Bharti Airtel’s India business trades at 11.34x/10.4x FY28E/FY29E implied EV/EBITDA, while Bharti Hexacom trades at 10.3x/9.9x FY28E/FY29E, respectively. We maintain REDUCE on Bharti and Hexacom with TP of Rs2,000 and Rs1,600, respectively.

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