UBS Sees Telecom Quarter On Silent Mode; No Buy Calls On Any Stock In Sector
UBS remains skeptical about near-term catalysts, highlighting that the sector may be 'priced for perfection'.
As India's telecom sector heads into an unremarkable June-quarter earnings season, UBS has sounded a cautious note, downgrading Bharti Airtel to 'sell' from 'neutral' and Vodafone Idea to 'neutral' from 'buy'.
The investment bank now holds no buy-rated stocks in the Indian telecom space, citing rich valuations and potential delays in expected tariff hikes.
Despite trimming its recommendation, UBS has raised its price target on Bharti Airtel from Rs 1,705 to Rs 1,970, reflecting a 5-7% upgrade to medium-term revenue estimates and a 2-3% boost to EPS. Indus Towers sees only marginal estimate revisions, with its target nudging up from Rs 440 to Rs 455. UBS has also slashed its price target on Vodafone from Rs 12.1 to Rs 8.5.
Valuations Rich, Catalysts Missing
UBS remains skeptical about near-term catalysts, highlighting that the sector may be "priced for perfection". The house continues to model a 10–12% mobile tariff hike for late FY26 but warns that this assumption could prove optimistic.
Indian mobile tariffs are now broadly in line with global emerging markets, and UBS notes that lower-end plans in India are already more expensive than comparable GEM markets. This dynamic may restrict operators from pushing through price hikes across all customer segments, dampening revenue uplift.
Valuation concerns are also front and centre. UBS pegs Bharti Airtel's India business at a fiscal 2027 EV/Ebitda multiple of 13 times and Vodafone at 11 times — levels the brokerage considers expensive in light of the sector's muted outlook.
'Boring' Quarter Ahead
UBS characterises the fiscal 2026 June quarter as "boring", expecting limited movement in core metrics absent any significant price action. Bharti Airtel and Vodafone are projected to post modest quarter-on-quarter mobile revenue growth of 2% and 0.5%, respectively.
Recent TRAI data indicates that Bharti's subscriber additions are slowing. UBS estimates net adds of 3 million for Airtel and a 1 million decline for Vodafone in the quarter. Average revenue per user is expected to rise only modestly by 1.2–1.7%.
For tower operator Indus Towers, Vodafone's capex should boost June quarter rental revenues by 3.6% sequentially, says UBS.
Vodafone's medium-term revenue estimates have been lowered by 3-4%, with Ebitda estimates down 2-3%. Capex forecasts have also been cut by 3–4% due to ongoing funding delays.
