UBS cuts Bharti Airtel rating to 'Sell', Vodafone Idea to 'Neutral'; target prices & more
UBS has revised its ratings on Bharti Airtel to 'Sell' and Vodafone Idea (VIL) to 'Neutral' citing 'expensive valuations' and limited growth prospects in the telecom sector.
- Jul 11, 2025,
- Updated Jul 11, 2025 9:27 AM IST
UBS has revised its outlook on key telecom stocks, downgrading Bharti Airtel from 'Neutral' to 'Sell' and Vodafone Idea (VIL) from 'Buy' to 'Neutral'. This adjustment comes ahead of the sector's Q1FY26 results as UBS raises concerns over 'expensive valuations' and a lack of significant growth drivers in the market. The shift means UBS currently has no 'Buy'-rated stocks in the telecom sector.
Going into the quarter, UBS anticipates 'a "boring" quarter' with minimal price intervention expected. The firm forecasts Bharti Airtel to see a 2 per cent quarter-on-quarter mobile revenue growth, while VIL is projected to achieve only a modest 0.5 per cent increase. These projections are based on current market conditions without any substantial price changes.
Recent data from the Telecom Regulatory Authority of India (TRAI) highlights that Airtel's net additions have slowed, while Jio is gaining market share. UBS estimates a subscriber growth of 3 million for Airtel and a decline of 1 million for VIL. The firm also projects a modest increase in Average Revenue Per User (ARPU) between 1.2 per cent and 1.7 per cent for the quarter.
Airtel's performance in its home broadband and enterprise segments is expected to remain strong, driving consolidated revenue growth of 18 per cent year-on-year and Ebitda growth of 20 per cent (+2.7 per cent and +1.2 per cent QoQ, respectively). On the other hand, Indus Towers is set to benefit from VIL's capital expenditure, reporting a 3.6 per cent QoQ growth in rental revenue.
Despite the positive outlook for Airtel's non-mobile segments, UBS's downgrade reflects broader concerns around sustainability. VIL's capex sustainability is particularly in question, as the company faces challenges in raising necessary funds for its planned three-year capex of Rs 50,000-55,000 crore.
UBS's updated price targets also reflect these shifts. Bharti Airtel's target price increased from Rs1,705 to Rs1,970, following medium-term revenue estimate adjustments. Conversely, VIL's price target decreased from Rs 12.10 to Rs 8.50, considering lowered earnings expectations and capex delays.
For Indus Towers, UBS made marginal changes to its estimates, leading to a slight increase in the price target from Rs 440 to Rs 455. This adjustment acknowledges the potential rental revenue growth induced by VIL's ongoing but uncertain capex plans.
Overall, the telecom sector faces mixed prospects as market dynamics evolve. UBS's revised ratings underscore the challenges of sustaining growth amidst competitive pricing and varying market conditions.
UBS has revised its outlook on key telecom stocks, downgrading Bharti Airtel from 'Neutral' to 'Sell' and Vodafone Idea (VIL) from 'Buy' to 'Neutral'. This adjustment comes ahead of the sector's Q1FY26 results as UBS raises concerns over 'expensive valuations' and a lack of significant growth drivers in the market. The shift means UBS currently has no 'Buy'-rated stocks in the telecom sector.
Going into the quarter, UBS anticipates 'a "boring" quarter' with minimal price intervention expected. The firm forecasts Bharti Airtel to see a 2 per cent quarter-on-quarter mobile revenue growth, while VIL is projected to achieve only a modest 0.5 per cent increase. These projections are based on current market conditions without any substantial price changes.
Recent data from the Telecom Regulatory Authority of India (TRAI) highlights that Airtel's net additions have slowed, while Jio is gaining market share. UBS estimates a subscriber growth of 3 million for Airtel and a decline of 1 million for VIL. The firm also projects a modest increase in Average Revenue Per User (ARPU) between 1.2 per cent and 1.7 per cent for the quarter.
Airtel's performance in its home broadband and enterprise segments is expected to remain strong, driving consolidated revenue growth of 18 per cent year-on-year and Ebitda growth of 20 per cent (+2.7 per cent and +1.2 per cent QoQ, respectively). On the other hand, Indus Towers is set to benefit from VIL's capital expenditure, reporting a 3.6 per cent QoQ growth in rental revenue.
Despite the positive outlook for Airtel's non-mobile segments, UBS's downgrade reflects broader concerns around sustainability. VIL's capex sustainability is particularly in question, as the company faces challenges in raising necessary funds for its planned three-year capex of Rs 50,000-55,000 crore.
UBS's updated price targets also reflect these shifts. Bharti Airtel's target price increased from Rs1,705 to Rs1,970, following medium-term revenue estimate adjustments. Conversely, VIL's price target decreased from Rs 12.10 to Rs 8.50, considering lowered earnings expectations and capex delays.
For Indus Towers, UBS made marginal changes to its estimates, leading to a slight increase in the price target from Rs 440 to Rs 455. This adjustment acknowledges the potential rental revenue growth induced by VIL's ongoing but uncertain capex plans.
Overall, the telecom sector faces mixed prospects as market dynamics evolve. UBS's revised ratings underscore the challenges of sustaining growth amidst competitive pricing and varying market conditions.