Why did UBS downgrade Bharti Airtel, Vi ahead of Q1 results? Find out here

UBS has downgraded Bharti Airtel to 'Sell' and Vi to 'Neutral', while keeping the target prices unchanged at ₹1,970 and ₹8.5, respectively.

UBS on Indian telcos: Ahead of the June quarter (Q1FY26) earnings, foreign brokerage UBS has taken a cautious stance on India’s telecom sector, downgrading Bharti Airtel and Vodafone Idea (Vi), citing concerns around valuations and limited near-term catalysts.  

 

Given this, at the last count, Bharti Airtel was trading 0.81 per cent lower at ₹1,949.25 while Vodafone Idea was down 0.82 per cent at ₹7.28. By comparison, BSE Sensex was trading 0.30 per cent lower at 82,944.42 levels. 

   

UBS has downgraded Bharti Airtel from ‘Neutral’ to ‘Sell’, while Vi was downgraded from ‘Buy’ to ‘Neutral’. However, the brokerage has kept the target price unchanged at ₹1,970 for Bharti Airtel and ₹8.5 for Vodafone Idea. 

 

“Going into the sector's Q1FY26 results, we downgrade Bharti Airtel from Neutral to Sell and VIL from Buy to Neutral, which essentially means we have no Buy-rated stocks in the Space,” Navin Killa, Aditya Chandrasekar, Rwibhu Aon and Ajay Raj Choudhary of UBS said, in a note dated July 10. 

 

UBS analysts believe the sector is ‘priced for perfection,’ with stock valuations already factoring in a 10-12 per cent tariff hike expected in late FY26. However, analysts flagged the risk of delay in these price increases, especially as India’s mobile tariffs are now aligned with global emerging markets.  

 

At the lower end of the pricing spectrum, Indian tariff plans are even more expensive than their GEM peers, making it harder for telcos to pass on further hikes, particularly to budget users. That, UBS warns, could cap the revenue upside even if price hikes are implemented. 

 

Q1 results expectations

 

For the June quarter (Q1FY26), UBS expects a relatively ‘boring’ show, with no major pricing actions taken. Airtel is seen reporting a modest 2 per cent sequential growth in mobile revenue, while Vi may see just 0.5 per cent.  

 

Subscriber trends are also a worry, with Telecom Regulatory Authority of India (TRAI) data suggesting that Airtel’s net additions are slowing, while rival Reliance Jio continues to grab market share. The quarter may see Airtel add around 3 million subscribers, while Vi could lose close to 1 million. 

 

Despite this, Airtel’s non-mobile segments - such as home broadband and enterprise - are expected to post healthy growth, providing some cushion to its consolidated performance.  

 

However, Vi's challenges remain more structural, particularly around funding. Its ambitious three-year capex plan of ₹50,000–55,000 crore hinges on successful debt raising—something that remains uncertain. 

 

Estimates revision

 

Meanwhile, UBS has slightly revised its earnings models and price targets based on medium-term assumptions. For Bharti Airtel, the brokerage has nudged up medium-term revenue estimates by 5-7 per cent, leading to a 2-3 per cent increase in EPS forecasts. As a result, the price target has been raised from ₹1,705 to ₹1,970. However, despite the upward revision, UBS has downgraded the stock to a ‘Sell’, citing stretched valuations and limited immediate triggers.

 

In contrast, Vodafone Idea (Vi) has seen downward revisions across key metrics. The brokerage has cut Vi’s mobile revenue estimates by 3-4 per cent and trimmed Ebitda forecasts by 2-3 per cent, reflecting concerns over growth and operational performance. Additionally, capex projections have been lowered by 3-4 per cent due to delays in fundraising. Consequently, the price target has been sharply reduced from ₹12.1 to ₹8.5, with the stock’s rating revised to ‘Neutral’ from ‘Buy’.

 

  For Indus Towers, UBS has made marginal adjustments to its estimates, resulting in a slight increase in the price target from ₹440 to ₹455. The rating remains unchanged at ‘Neutral’.

 

In short, with limited near-term tailwinds and stretched valuations, UBS is advising caution, marking a shift in sentiment just as the sector gears up to report earnings.