'Significant relief on AGR dues': What MOFSL says on Vodafone Idea, Dec tariff hike & more

MOFSL in a fresh note on Tuesday said even as its base case assumes a 15 per cent headline tariff hike from December 2025, there are several factors that could delay such a move. The domestic broking firm said the government is working on a relief package for Vodafone Idea (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 Vodafone Idea could lead to a delay in potential tariff hikes, MOFSL said.

MOFSL noted that Bharti Airtel has consistently been the biggest beneficiary of past tariff hikes and has closed the gap in revenue market share with RJio by 190 basis points since June 2024. The gap between the two now stands at 2.5 per cent and was as low as 2.1 per cent in December 2024 as RJio has been a delayed beneficiary of the tariff hikes. 

"We believe that if tariff hikes are announced in December 2025, 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," MOFSL said. 

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, MOFSL expects tariff repair to continue.

It is building in a 15 per cent or Rs 50 per cycle in base pack  tariff hike in December 2025, which should take Bharti Airtel closer to the stated goal of Rs 300 ARPU.

"We believe there is limited scope of tariff hikes on minimum recharge packs (Rs 199/28 days), and while tariffs remain under forbearance, we believe taking a 10 per cent-plus headline tariff hike every alternate year could become difficult," it said.

That said, a change in the tariff construct to usage-based plans against the current unlimited daily data plans could lead to greater monetisation from higher data consuming users and provide further ARPU upside for telcos, MOFSL said.

"We remain structurally positive on the telecom sector and continue to prefer Bharti (BUY, target price Rs 2,365) and RJio (RIL, BUY, target price Rs 1,765," MOFSL said.

Driven by three rounds of smartphone tariff hikes in December 2019, December 2021, and July 2024, pricing for RJio’s popular 84-day 1.5GB per day and 28-day 1.5GB per day plans has almost doubled over the last five years, while pricing for Bharti Airtel and Vodafone Idea's comparable popular plans have increased 75-90 per cent over the same period. 

Despite the three rounds of tariff hikes, telco spends as a percentage of nominal GDP has inched up to 0.86 per cent in September 2025 against 0.71 per cent in September 2019 and remains significantly lower than 1.4 per cent in July 2016, just before RJio’s launch. 

Also data costs in India remain among the lowest globally, even as consumption is among the highest, which provides runway for further tariff hikes, MOFSL said.