Vodafone Idea, Bharti Airtel share price targets: This chart shows why tariff hikes from Q2 hold the key

Tariff hikes hold the key for telecom players such as Vodafone Idea Ltd and Bharti Airtel Ltd to deliver double-digit year-on-year (YoY) revenue growth in FY27, MOFSL said on Monday. The brokerage noted that more than 50 per cent of Reliance Jio’s subscribers have now opted for 5G and felt the free unlimited 5G offerings, which acted as a headwind to data monetisation, must stop. Telcom operators including Bharti Airtel, Rjio and Vodafone Idea are seen starting monetising higher data consumption on 5G. 

MOFSL said the benefits of the tariff hikes now in the base and the wireless revenue growth moderated to 7 per cent YoY in Q4. In the absence of a tariff hike soon, the wireless revenue growth for private telcos could remain subdued over the next few quarters. 

"We believe that beyond the next tariff hike, telcos need to rework the pricing architecture to monetize the secular 20 per cent-plus YoY growth in data consumption. We believe a change in tariff architecture could drive higher growth for telcos. Our preferred picks remain Bharti Airtel, Bharti Hexacom, and RIL," MOFSL said.

The domestic brokerage has 'Buy' on Bharti Airtel with a target price of Rs 1,798. For Vodafone Idea, MOFSL suggested 'Neutral' and a target of Rs 10 per share. 

Among the three private telcos, RJio extended its subscriber market share leadership with 70 basi points YoY increase to reach 46.5 per cent, followed by Bharti (up 50 bps YoY) at 36.6 per cent. Vodafone Idea lost another 120 bps YoY market share, with its share declining to 17 per cent in FY26.

With the July 2024 tariff hike in the base, the blended wireless average revenue per user (ARPU) growth moderated to 6 per cent YoY on exit base and was largely driven by the premiumisation of the subscriber mix as headline tariffs remained largely unchanged. 

Vodafone Idea remained the biggest beneficiary of subscriber mix improvements with a second successive quarter of industry-leading ARPU growth (up 6 per cent YoY), followed by an estimated 5 per cent YoY growth for Bharti Airtel and 2 per cent growth for RJio. 

"Going ahead, we build in 15 per cent smartphone tariff hike from 2QFY27, which should drive 8 per cent YoY growth in blended wireless ARPU to Rs 232 by FY27 on an average basis, with exit ARPU 6 per cent higher than FY26 average at Rs 246 (up 12 per cent YoY vs 4QFY26 levels)," MOFSL said.

MOFSL said FY26 was a steady year for the private telcos, with combined wireless revenue rising 10 per cent YoY to Rs 2.7 lakh crore, although this represented a slowdown from 13 per cent YoY growth recorded in FY25. The revenue growth in FY26 was largely driven by 8.5 per cent YoY growth in wireless ARPU - partial benefit of July 2024 tariff hike and subscriber mix improvements), while consumer wireless subscribers inched up 2 per cent YoY.