India’s telecom sector is in focus. Though growth is expected to moderate, there are expectations of a fresh round of tariff hike in the second quarter of FY27. According to the brokerage report by Motilal Oswal, tariff hikes could once again become the biggest trigger for earnings and revenue expansion across the industry.
As per the brokerage house, the sector has already seen significant pricing increases over the past few years, but the brokerage believes another round of hikes may not be far away. While telecom companies continued to report steady growth in FY26, the pace has started to slow.
Let’s take a look at what the take on this is sector and which stocks are in its preferred list –
Brokerage’s preferred telecom picks
The brokerage house Motilal Oswal has identified three stocks as its preferred choices. As per the brokerage report, its top picks are Bharti Airtel, Bharti Hexacom and Reliance Industries (RIL).
The brokerage believes these companies are well positioned to benefit from future tariff increases, rising data consumption and improvements in subscriber quality.
Furthermore, the brokerage house also expects telecom operators to find new ways to monetise growing data usage as Fifth Generation (5G) services become more widespread across the country.
Motilal Oswal in the report added, “Our preferred picks remain Bharti Airtel, Bharti Hexacom, and RIL.”
Why tariff hikes are back in focus
A key theme running through the report is the possibility of another tariff increase in FY27. According to Motilal Oswal, revenue growth across private telecom operators has begun to moderate after the benefits of the July 2024 tariff hikes were fully absorbed into the base.
The brokerage noted that “Historically, we have observed that industry leaders’ wireless revenue growth moderating to single digits YoY has been a precursor to the next round of tariff hikes.”
The report added that the combined wireless revenue of private telecom operators grew about 10% year-on-year to Rs 2.7 trillion in FY26. However, growth slowed compared with FY25, when revenue had increased by around 13%.
Motilal Oswal expects a smartphone tariff hike of nearly 15% from the second quarter of FY27. The brokerage estimates this could push combined wireless revenue to nearly Rs 3 trillion in FY27 and support double-digit growth for the sector.
Subscriber quality improving despite slower growth
One of the interesting trends highlighted in the report is that while subscriber growth remains modest, the quality of telecom users continues to improve.
Motilal Oswal in its report added that more customers are shifting from basic voice services to data-based plans.
The report further states that the number of data users increased significantly during FY26. On the other side, the proportion of subscribers using mobile internet services continued to rise.
Motilal Oswal said, “Upgradation from non-data to data has been a key driver of ARPU growth in the absence of a headline tariff hike.”
Bharti Airtel gains ground
The brokerage report indicates that Bharti Airtel continued to strengthen its position during FY26. The brokerage added that the company recorded industry-leading growth in wireless revenue and continued to gain market share.
The report noted that “Bharti once again led with ~13% YoY wireless revenue growth in FY26.”
Reliance Jio maintained its leadership in subscriber additions and further expanded its consumer wireless market share. Vodafone Idea, however, continued to lose subscribers and market share despite some improvement in revenue metrics.
According to the brokerage report, Bharti Airtel has narrowed the gap with Reliance Jio in wireless revenue market share over the last two years, supported by stronger tariff benefits and premium customer additions.
The 5G monetisation challenge
While data usage continues to surge, telecom companies are yet to fully capitalise on this trend. The report points out that free unlimited 5G offerings have limited the industry’s ability to earn more from rising data consumption.
Motilal Oswal observed that “With more than 50% of RJio’s subscribers now opting for 5G, we believe the free unlimited 5G offerings should stop.”
The brokerage further added, “Telcos need to rework the pricing architecture to monetize the secular 20%+ YoY growth in data consumption.”
What investors need to watch
As per the brokerage house report, average monthly data consumption per subscriber rose sharply during FY26. However, the next phase of growth may depend on whether telecom companies can successfully convert that rising usage into higher revenue.
Motilal Oswal believes tariff hikes, better monetisation of 5G services and continued improvement in subscriber quality will remain the key factors shaping the telecom sector’s performance in FY27.
Disclaimer: Investment in the securities market is subject to market risks; read all the related documents carefully before investing. The stock recommendations and targets mentioned in this article are based on a brokerage report by Motilal Oswal and do not constitute personal financial, tax, or investment advice by financialexpress.com. Readers are advised to consult a SEBI-registered investment advisor before making any buy, sell, or hold decisions based on these market projections. This disclaimer has been generated using AI to support user well-being and responsible content consumption.