The telecom sector’s quiet quarter: Why growth is coming from users, not prices

For most consumer-facing sectors, a quiet quarter is a boring one. For Indian telecom, it’s arguably the more interesting story. Estimates from multiple brokerages point to only modest, single-digit sequential revenue growth for operators in the April-June period, and, unusually, none of it is driven by price increases. Instead, the quarter’s growth has to be explained entirely through volumes: how many people signed up, and how much more they are willing to spend on data once they’re on the network. An extra day on the calendar this quarter adds a small mechanical lift to reported revenue, but it doesn’t change the underlying picture, which is that pricing power, the one lever that has driven most of the sector’s earnings upgrades since 2021, has been sitting idle since July 2024.

That’s an important distinction for anyone trying to read through to full-year earnings. Volume-led growth is real, but it’s also slower and more linear than the step-changes a tariff hike produces. It means the June-quarter print is likely to look healthy on paper without necessarily changing the market’s underlying view of the stocks, since most of that view is currently anchored to when, not whether, the next hike lands.

Subscriber adds and the premiumisation story
The net-add numbers being modelled for the quarter aren’t dramatic, but they are directionally telling. Bharti Airtel is expected to add around 3.5 million subscribers, while Vodafone Idea is pencilled in for a much smaller 500,000. That gap alone says something about the competitive dynamics in the sector right now: Airtel is still winning a disproportionate share of new and switching customers, while Vi’s addition numbers reflect a company that is stabilising its base rather than aggressively growing it.

Layered on top of subscriber growth is premiumisation, industry shorthand for customers either upgrading from 2G to 4G or simply consuming more data on plans they already hold. Combined, these two forces are expected to lift blended ARPU by roughly 5 percent year-on-year sector-wide, entirely independent of any list-price change. It’s a reminder that ARPU growth and tariff hikes, while often talked about interchangeably, are not the same thing; one is a function of customer behaviour, the other of pricing decisions, and right now only the former is doing any work.

How big a hike, and when? Brokerages don’t fully agree
If there’s one thing every brokerage agrees on, it’s that a tariff hike is coming. Where they diverge is on magnitude and timing, and the spread between estimates is wide enough to matter for anyone modelling FY27 earnings:

Morgan Stanley’s estimate is the most aggressive of the three, both in size and specificity, pencilling in a hike almost double Axis Capital’s base case. That kind of dispersion usually signals genuine uncertainty rather than a rounding difference, and it’s worth remembering that all three houses are essentially forecasting management behaviour, not observing it; the actual decision still rests with the operators and, to some extent, with how comfortable they feel moving in lockstep with each other.

The case for a second-half hike
The argument for a hike in the back half of the fiscal year rests on more than just the calendar since the last one. JM Financial’s thesis, for instance, links improving odds of a 12-15 percent increase to cooling inflationary pressure following the reopening of the Strait of Hormuz, which reduces one of the macro arguments operators might otherwise have used to justify holding off. Beyond the macro backdrop, two structural forces are arguably more important than timing alone.

The first is market structure. Policymakers appear to have a clear preference for preserving a stable operator landscape, informally described in the market as a three-plus-one structure, with Reliance Jio, Bharti Airtel and Vodafone Idea as the three viable private players alongside state-run BSNL. A tariff hike that improves Vi’s cash generation helps keep that structure intact, which gives the move a policy tailwind beyond pure commercial logic.

The second is capital efficiency. Operators have already spent heavily building out 5G networks, and that capex has yet to translate into proportionate returns, since most 5G usage today substitutes for 4G data rather than commanding a premium. Raising tariffs is, in effect, one of the few remaining levers operators have to lift return on capital employed without waiting for a genuinely new 5G use case, such as fixed wireless access or enterprise services, to scale. JM Financial goes a step further, expecting the industry to eventually move toward a pay-as-you-use pricing model for data, a shift that would tie revenue more directly to consumption and could support ARPU growth well beyond this single hike cycle.

Reading the company-level numbers
Zooming in from the sector to individual operators shows a similar split in how much credit each is getting for volume-led growth versus how exposed each remains to the timing of a hike:

The gap between the two brokerages’ Airtel numbers is itself worth noting. ICICI Securities’ 8.7 percent India revenue growth figure covers the entire domestic business, while Morgan Stanley’s more narrowly scoped 7.8 percent mobile revenue estimate is arguably the more cautious read, since it strips out the faster-growing home broadband and enterprise segments that are increasingly propping up Airtel’s growth profile. Morgan Stanley is explicit that this diversification is now doing real work: non-mobile revenue is expected to grow faster than the core mobile business, which is itself a structural shift worth watching independent of the tariff debate, since it reduces Airtel’s dependence on a single pricing decision to drive earnings.

Vodafone Idea’s picture is narrower by comparison. With only modest subscriber additions, essentially all of its 4.6 percent revenue growth this quarter is being attributed to ARPU expansion, which makes Vi’s numbers, more than Airtel’s, a fairly direct read on how premiumisation alone is playing out for an operator that doesn’t have adjacent businesses to fall back on.

What this means going into earnings season
For investors, the practical takeaway is that the June-quarter results are unlikely to be the catalyst that re-rates telecom stocks either way. A print that’s merely in line with these subscriber- and ARPU-led estimates would confirm the sector’s underlying resilience but wouldn’t materially change FY27 earnings estimates, since none of it depends on management action. The more consequential data point will come later in the year, once operators actually announce a tariff decision, and the size of that eventual move, somewhere between the 10 percent floor implied by Axis Capital and the 20 percent ceiling implied by Morgan Stanley, is what will determine how much of the current optimism was justified.

There’s also a risk worth flagging on the other side: a smaller or later-than-expected hike could weigh on sentiment, even if underlying operating metrics, subscriber growth, ARPU, and margins continue to look healthy. In that sense, the June quarter is less a test of demand, which appears intact, and more a test of investor patience with a sector whose next leg of earnings growth depends on a decision that, as of now, hasn’t been made.

Bottom line
The fundamentals underpinning Indian telecom- subscriber growth, premiumization, and improving return metrics- are intact heading into the June-quarter results. What’s missing is the one lever that would turn steady growth into an earnings re-rating, and every brokerage covered here agrees it’s a matter of when, not if.

CT Bureau