Rural And 5G Expansion Will Energize Premium Digital Adoption

Key Takeaways

• Significant revenue and margin expansion can be driven by upselling and digital bundling efforts, beyond what consensus expects from tariff hikes or market expansion alone.
  
• Lower investment needs and leadership in digital adoption support strong cash flow growth, enhanced shareholder returns, and long-term dominance in underpenetrated markets.
  
• Regional concentration, heavy 5G investment, digital shifts, low-income user growth, and rising compliance costs all threaten revenue stability and long-term profitability.

Catalysts

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

• While analyst consensus expects ARPU growth to come from mix improvements and network expansion, the reality is that Bharti Hexacom's ARPU has significant latent headroom due to an exceptionally low current penetration of postpaid and feature phone upgrades; persistent execution on upselling data, top-ups, and value-added services-even without industry-wide tariff hikes-can drive outsized revenue and margin expansion well above consensus expectations.
  
• Analyst consensus sees continued rural/tier-2 expansion as a linear driver of subscriber growth, but given the aggressive rollouts already in underserved regions and Bharti Hexacom's leadership in mobile data consumption, network utilization sweating and targeted fiber/FWA monetization could unlock a step-change in both revenue per site and EBITDA margins by structurally lowering rural churn and maximizing infrastructure leverage.
  
• Bharti Hexacom is on the cusp of structurally lower CapEx intensity due to completion of its main rural acceleration program and rollout phase, yet still stands to benefit from accelerating disposable incomes and digital adoption in its markets, which can translate to much higher operating free cash flow conversion and an elevated shareholder payout ratio over time.
  
• The company's ability to continuously bundle cutting-edge digital services (like AI via Perplexity, premium OTT content, and cloud storage) leverages national partnerships and positions Hexacom as the premium, digitally integrated provider in its regions-this creates a competitive moat, increases customer stickiness, and provides room for steady ARPU accretion and retention-driven margin improvement.
  
• Bharti Hexacom's dominant position in fast-growing, underpenetrated circles positions it to benefit disproportionately from the digitalization wave sweeping rural India-including rising adoption of OTT, payments, government e-services, and IoT applications-translating into long-term, above-market growth in mobile data usage, average revenues and digital service monetization.

Bharti Hexacom Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Bharti Hexacom compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Bharti Hexacom's revenue will grow by 17.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 15.4% today to 34.0% in 3 years time.
• The bullish analysts expect earnings to reach ₹49.3 billion (and earnings per share of ₹98.55) 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 bullish analyst cohort, the company would need to trade at a PE ratio of 32.7x 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 remains highly exposed to the Northeast and Rajasthan regions, which creates significant regional concentration risk; any adverse economic events or intensified competition in these circles could negatively affect revenue growth and earnings stability over the long term.
  
• Ongoing high capital expenditure for 5G deployment and necessary upgrades, particularly in challenging geographies, may constrain free cash flow and suppress net margins if average revenue per user (ARPU) does not increase proportionally with network investments.
  
• The gradual industry shift towards alternative digital communication platforms such as satellite internet, Wi-Fi calling, and over-the-top (OTT) messaging services threatens to erode the traditional mobile subscriber base, potentially resulting in declining legacy voice and data revenues.
  
• Expanding government efforts to drive digital inclusion could pressure ARPU as new subscriber growth skews towards lower-income users, which may limit the company's ability to grow top-line revenue despite higher customer additions.
  
• Heightened regulatory requirements for data privacy and the rising cost of cybersecurity compliance could increase operating expenses and expose Bharti Hexacom to reputational and financial losses in the event of data breaches, putting further pressure on future profitability.

Valuation

• The assumed bullish price target for Bharti Hexacom is ₹2250.0, which is the highest 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 bullish 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 bullish analysts, you'd need to believe that by 2028, revenues will be ₹145.1 billion, earnings will come to ₹49.3 billion, and it would be trading on a PE ratio of 32.7x, assuming you use a discount rate of 12.7%.
• Given the current share price of ₹1772.9, the bullish analyst price target of ₹2250.0 is 21.2% higher.
• 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.