Summary:
Ambit Capital expects Indian telecom operators to raise mobile tariffs by 15% in December 2026, followed by 12% increases every two years, citing weak industry returns, Vodafone Idea’s financial needs and Reliance Jio’s investment targets. The brokerage projects annual ARPU growth of 9–12% through FY28 and highlights recent Airtel plan changes as early signs of pricing adjustments. While regulatory flexibility and the government’s preference for three private operators could support the sector, delays in tariff hikes and the entry of a new competitor remain risks. Bharti Airtel remains Ambit’s top sector pick, although the proposed December increase has not been confirmed by operators.
Ambit Capital expects telecom operators to increase mobile tariffs by 15% in December 2026, followed by 12% hikes every two years over the next decade. The brokerage has retained this projection, citing low industry returns, Vodafone Idea Limited’s (Vi) funding needs, and Reliance Jio’s requirement to generate better returns on its investments.
The brokerage forecasts that Indian telecom companies will achieve annual average revenue per user (ARPU) growth of 9–12% between financial year 2025–26 (FY26) and FY28. It estimates that Vi must increase its ARPU from the current Rs 177 to above Rs 300 by FY30 to fulfil its financial commitments. After accounting for the proposed December tariff revision, Ambit projects Vi’s cash EBITDA to reach Rs 171 billion in FY28, against estimated statutory dues of Rs 216 billion for the same year.
Ambit identified poor industry returns as a major reason for the expected tariff increases. It noted that telecom operators generated a pre-tax return on capital employed (RoCE) of approximately 10% in FY26, falling short of their cost of capital. During the same financial year, Bharti Airtel India recorded a pre-tax RoCE of 11%, while Reliance Jio reported 8%.
The brokerage also highlighted recent adjustments to mobile plans as early indications that tariff increases may be approaching. In August 2026, Bharti Airtel discontinued its entry-level plan offering 1.5 gigabytes (GB) of data per day and increased prices for its postpaid plans. Ambit estimates that these changes could improve Airtel’s ARPU by 4.4%. Jio’s Prime membership, which keeps plan prices unchanged until September 5, 2027, was also identified as a possible indication of pricing changes in the coming months. Projections outlined in Jio Platforms’ draft red herring prospectus suggest that data ARPU could grow at a compound annual growth rate of 10.3% between FY26 and FY31.
Ambit characterised the Telecom Regulatory Authority of India’s (TRAI) stance on mobile tariffs as a forbearance-based approach, under which operators can set prices according to market conditions. The brokerage also expects the government’s preference for a three-player private telecom market to benefit established operators. However, the entry of another telecom player and delays in implementing tariff increases remain potential risks to its positive outlook. Ambit identified Bharti Airtel as its preferred stock in the sector and maintained Buy ratings on Airtel, Indus Towers, Vi and Bharti Hexacom. The anticipated December tariff hike remains Ambit’s forecast and has not been officially confirmed by telecom operators.
