Airtel, Vodafone Idea, Indus Towers: Check fresh targets for Telecom stocks amid Jio Platforms IPO

Ambit said India’s telecom sector remains resilient, retaining its expectation of a 15 per cent tariff increase in December 2026, followed by a 12 per cent rise every two years over the next decade. The assessment followed its digital infrastructure conference on satellite communications, tariffs, technology platforms, emerging radio technologies and datacentres.

Ambit said power and water linkages, rather than utilisation, were the main risks for tower companies, while edge datacentres could offer growth with limited competition. Satellite communications could threaten incremental monetisation, although regulatory safeguards and sovereignty concerns favour telcos. Its positive view assumes pricing discipline after Jio’s listing and government support for three private operators. Bharti Airtel is its top sector pick.

Regulatory framework
The Telecom Regulatory Authority of India (TRAI) can regulate tariffs, interconnection and service quality, but has used its tariff powers selectively, including for high-volume commercial text messages and mobile number portability charges. Its forbearance approach has allowed market-determined mobile tariffs. Experts said the industry was balancing consumer and investor interests, limiting risks to monetisation linked to higher data usage, although Satcom remained an emerging investor risk.

Datacentre investments
Airtel and Jio have invested in co-location datacentres through specialised downstream entities using low-cost third-party capital. Ambit said execution, particularly securing water and power, was a bigger risk than customer acquisition. Payback periods have risen to 11 years from 4-4.5 years before Covid. Dholera, Digha, Puducherry and Vizag, which have upcoming submarine cable landing stations, could help mitigate costs.

Private cloud operations could help integrated telcos exceed utility returns. Disruptors are also leasing graphics processing units for training and inference, but face high chip costs because of a monopolistic upstream structure.

Technology transition
Telcos have brought critical network and customer engagement functions, including Operations Support Systems and Business Support Systems, in-house. They have developed solutions for field forces, network management and radio technologies. Experts said these products served niche markets, and commercial validation would require sizeable new revenue pools or lower customer churn.

Tariff outlook
Ambit linked future tariff increases to Vodafone Idea’s need to raise average revenue per user above Rs 300 by FY30 from Rs 177, Reliance Industries’ need to deliver Jio Platforms investors a dollar internal rate of return above 10 per cent, and the industry’s projected 10% pre-tax return on capital employed in FY26, below its cost of capital.

Its valuations imply a 2-4 per cent FY27 free-cash-flow yield for Airtel and Jio against 10% globally. Ambit expects revenue compound annual growth of 16 per cent and 15 per cent, respectively, during FY26-FY29. It said operating leverage could support conservative balance sheets, dividends and institutional inflows, while Vodafone Idea and Indus remain linked to government action to preserve three private operators.

Picks & target price
Bharti Airtel Ltd is Ambit's top pick from telecom space with a 'buy' rating and a target price of Rs 2,732. It has also a 'buy' rating on Indus Towers Ltd (Target Price: Rs 532), Vodafone Idea Ltd (Target Price: Rs 18.7) and Bharti Hexacom Ltd (Target Price: Rs 2,130).