Mobile Saturation And Regulation Will Squeeze Margins Despite Upside

Key Takeaways

• Stagnant subscriber growth and heavy network upgrade needs limit revenue expansion and reduce long-term profitability prospects.
  
• Reliance on limited regions and industry shifts expose the company to earnings volatility and rising operational risks.
  
• Strong ARPU growth, financial flexibility, digital partnerships, and broadband expansion position the company for sustained revenue growth and improved margins despite competitive pressures.

Catalysts

Provides mobile services, fixed-line telephone, and broadband services to end consumers under the Airtel brand in India.

• As mobile penetration reaches maturity in Bharti Hexacom's core markets of Rajasthan and the North-East, subscriber growth is likely to stagnate, directly constraining both top-line revenue and ARPU expansion in the years ahead.
  
• Intensifying regulatory scrutiny and evolving government policies around data privacy, security, and potential digital taxation will raise compliance costs and operational complexity, leading to sustained margin pressure and reduced long-term profitability.
  
• The entry and expansion of disruptive alternative technologies such as satellite internet and low-cost public Wi-Fi threaten to erode Bharti Hexacom's traditional wireless customer base, putting at risk both revenue stability and future earnings power.
  
• Bharti Hexacom's continued dependence on a narrow set of geographies exposes the company to outsized economic and regulatory risks unique to these regions, increasing the likelihood of earnings volatility and hampering reliable free cash flow generation.
  
• Persistent high network upgrade requirements, especially for 5G and rural coverage, alongside the risk of ARPU compression from aggressive industry competition, will likely result in structurally lower returns on incremental capital and muted long-term earnings growth.

Bharti Hexacom Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Bharti Hexacom compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Bharti Hexacom's revenue will grow by 12.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 15.4% today to 23.8% in 3 years time.
• The bearish analysts expect earnings to reach ₹30.1 billion (and earnings per share of ₹60.27) by about August 2028, up from ₹13.7 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 35.2x on those 2028 earnings, down from 64.5x today. This future PE is lower than the current PE for the IN Wireless Telecom industry at 48.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.73%, as per the Simply Wall St company report.

Bharti Hexacom Future Earnings Per Share Growth

Risks

• Bharti Hexacom has shown strong ARPU growth through continued mix improvement and levers such as postpaid upgrades, increased smartphone penetration, and targeted digital offerings, suggesting that even without broad industry tariff hikes, ARPU can expand further and sustain revenue growth over time.
  
• The company benefits from a stable balance sheet with net debt to EBITDAaL of only 0.7 times, robust cash generation, and limited external debt, providing ample financial flexibility for further investment, dividend increases, or debt repayment, all of which strengthen net margins and shareholder returns.
  
• There remains significant long-term home broadband opportunity in Hexacom's markets, with both FTTH and FWA expansion poised to drive subscriber additions and higher ARPU, supporting revenue growth and improved earnings quality, especially as rural and semi-urban data demand expands.
  
• Hexacom stands to leverage the parent Airtel's strong suite of digital partnerships-such as exclusive OTT content, Google cloud storage, and AI products like Perplexity-which offer clear paths to higher customer engagement, stickier relationships, and potentially improved margins through upselling and cross-selling.
  
• As industry CapEx intensity moderates after recent rollout surges, incremental network costs are expected to plateau, while further site additions and 5G upgrades can be managed prudently; this shift supports greater operating leverage, higher cash flow, and the ability to expand margins even amid competitive markets.

Valuation

• The assumed bearish price target for Bharti Hexacom is ₹1480.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Bharti Hexacom's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹2250.0, and the most bearish reporting a price target of just ₹1480.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ₹126.8 billion, earnings will come to ₹30.1 billion, and it would be trading on a PE ratio of 35.2x, assuming you use a discount rate of 12.7%.
• Given the current share price of ₹1772.9, the bearish analyst price target of ₹1480.0 is 19.8% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.