Gains ahead for Bharti Airtel on multiple triggers, recent correction

Bharti Airtel may see upside from tariff hikes, data monetisation and Nxtra expansion, with lower capex aiding deleveraging despite recent stock correction

The Bharti Airtel share price is down a bit but less so than the Nifty (Hexacom has lost more than the Nifty). There are concerns about Bharti’s investments in data centres via Nxtra and in its non-banking financial company (NBFC), Airtel Money. But the India performance is steady and Africa is doing well. The market expects a tariff hike soon, given that key rival, RJio, is expected to hike tariffs before the initial public offering (IPO).

 

Bharti has three key business areas — homes (the fibre business), enterprises, and data centres (DC). Capex would continue but growth is likely to accelerate. Given that the intensity of 5G rollout has peaked, lower capex over FY2026-28 (about 22 per cent of revenue versus 30 per cent in the last 3-4 years) could help with deleveraging.

 

Bharti has seen 2.9 per cent annual growth in subscribers, with 9.7 per cent growth in data subscribers over FY21-26, which has meant market share gains. There are serious growth opportunities given underpenetrated rural markets. The mobile broadband subscriber base may also grow since 20 per cent subscribers are still on 3G/2G networks.

 

A tariff hike of 10-12 per cent in the next two quarters is likely. Apart from tariff hikes, data monetisation may push average revenue per user (Arpu) up. Data consumption has grown at 31 per cent annually over the past five years.

 

Homes and enterprises (including DCs via Nxtra) contributed 24 per cent and 18 per cent, respectively of Bharti’s FY25 India revenue and operating profit. Nxtra’s 10-12 per cent market share offers headroom for high growth in a fast-growth segment. The recent $1 billion investment in Nxtra will lead to capacity expansion to 1 gigawatt (Gw) offering 25 per cent-plus market share.

 

The equity investments in Airtel Money will be less than 5 per cent of free cash flow (FCF) over the next five years and Airtel Money has access to over 400 million potential customers. Bharti may generate enough FCF to accelerate deleveraging (and offer dividends in the range of payout of 35-40 per cent of FCF). A weaker rupee could improve returns from Africa.

 

Analysts estimate Q4FY26 to be a steady quarter. Wireless Arpu growth for all players will be low. Wireless operating profit margins are likely to be similar to Q3FY26. Indus Towers could see a healthy increase in co-locations driven by Vodafone Idea’s rollout.

 

Bharti should see subscriber additions similar to that in Q3FY26. Data consumption is likely to be up 3-4 per cent quarter-on-quarter (Q-o-Q). Fixed wireless access is likely to have increased, with steady subscriber additions. Rental revenues for Indus may grow 1 per cent Q-o-Q. Relief on the adjusted gross revenue or AGR case could be around $4 billion. The listing of RJio could be a rating catalyst only if it boosts telcom valuations.

 

Nxtra Data’s $1 billion investment is led by Alpha Wave Global ($435 million), Carlyle ($240 million), and Anchorage Capital ($35 million) with the balance ($290 million) from Bharti. A capacity ramp-up from 300MW to 1Gw targets 25 per cent market share. Bharti retains a controlling stake of about 61 per cent, with Nxtra valuations at $3.1billion.

 

Nxtra’s business is co-location with a pan-Indian network of 14 large and over 120 Edge data centres. Nxtra’s FY25 revenue was ₹2,080 crore and operating profit was ₹790 crore with a profit of ₹220 crore. The financials are part of Bharti’s ‘Airtel business’ division accounting for 10 per cent share. Nxtra uses 49 per cent renewable energy and has partnered with Google to build a gigawatt-scale AI data centre ($15 billion investment).

 

Bharti has received the final call of ₹15,800 crore on partly paid shares from a rights issue (about 7 per cent equity dilution). This will aid it to achieve near-zero bank debt. In 9MFY26, FCF was ₹47,800 crore ($5.5bn), consolidated post leases and capex. The gearing ratio was at 1.

 

Bharti Airtel’s revenue market share (RMS) is up at about 36 per cent although market-leader RJio has also grown RMS. Bharti aims to increase data subscriber penetration from the current 70 per cent penetration of its 342 million India mobile subscriber base.

 

Consensus FY28 India ARPU estimates for Bharti Airtel (Bharti) and Bharti Hexacom (Hexacom) have been downgraded. But Airtel Africa (where Bharti holds 62 per cent) Arpu estimates have been upgraded.  Consensus Arpu estimate for FY28 end is up 3.5 per cent. The current correction could be an entry opportunity.