Bharti Airtel Q1 FY2026: Did India's Telecom King Defy Odds? Unpacking ARPU Growth & Strategic Transformation
The Indian equity markets have been on a roller coaster, riding a strong Q1 rally only to face a July correction driven by cautious guidance and global uncertainties. In this landscape, domestic-growth themes are emerging as preferred plays. It’s against this backdrop that we delve into the latest earnings from telecom giant Bharti Airtel (and its subsidiary Bharti Hexacom), a company firmly rooted in India’s consumption story.
Our focus, as always, isn’t just on the numbers themselves, but on the changes they signify and what they tell us about the company’s future earnings potential and management’s ability to deliver. Did Airtel continue to command its strong position, or were there any cracks beneath the surface? Let’s unwrap Q1 FY2026.
The ARPU Story: Sustained Growth Despite Market Headwinds
Bharti Airtel has reported a robust Q1 FY2026, demonstrating remarkable resilience and strategic foresight. Consolidated revenues landed at a healthy ₹49,463 Crores, an 18% year-over-year (YoY) increase. While impressive on the surface, the real story lies deeper, particularly in the Average Revenue Per User (ARPU).
For its India mobile business, Airtel’s ARPU climbed to ₹250, up from ₹245 last quarter and a significant 18.8% increase YoY from ₹211. This isn’t just a number; it reflects Airtel’s strategic focus on attracting and retaining quality customers through value-driven propositions, rather than resorting to aggressive headline tariff hikes. The company highlighted key drivers: the conversion of feature phone users to smartphones, upgrades from prepaid to postpaid, data monetization, and international roaming. The ability to increase ARPU consistently, even with lower mobile customer net additions this quarter (1.2 million vs. 5.0 million last quarter), signals strong pricing power and customer stickiness.
Table: India Mobile Operational Highlights
| Parameters | Unit | Jun-24 | Mar-25 | Jun-25 | Q-o-Q Growth | Y-o-Y Growth |
|---|---|---|---|---|---|---|
| Customer Base | 000’s | 354,515 | 361,593 | 362,796 | 0.3% | 2.3% |
| Net Additions | 000’s | 2,262 | 5,006 | 1,203 | -76% | -47% |
| Average Revenue Per User | Rs | 211 | 245 | 250 | 2.1% | 18.8% |
| Total GBs on network | Mn GBs | 18,789 | 21,078 | 22,840 | 8.4% | 21.6% |
| 4G/5G data customers | 000’s | 259,429 | 276,784 | 280,692 | 1.4% | 8.2% |
While mobile customer additions slowed, the growth in 4G/5G data customers (1.4% QoQ, 8.2% YoY) and overall data consumption (8.4% QoQ, 21.6% YoY) underscores the shift towards data-driven ARPU growth. With 152 million 5G customers by quarter-end and 5G handsets accounting for 86% of new smartphone shipments, Airtel is clearly capitalizing on the 5G rollout, offloading significant traffic from its 4G networks. This efficiency should support future network costs.
Airtel Business: The Strategic Shift Towards High-Margin Services
The B2B segment, “Airtel Business,” reported revenues of approximately ₹5,060 Crores. At first glance, this might seem stagnant compared to the overall growth. However, management clarified that this segment’s reported revenue was “impacted by a decline in the B2B segment due to the deliberate peeling off of low-margin revenue.” When stripped of this discontinued business, the underlying revenue growth was a sequential 2%.
This is a crucial insight. Airtel is strategically retooling its B2B portfolio. The focus is shifting from commoditized, low-margin connectivity services towards higher-growth, high-margin adjacencies like Cloud, Cybersecurity, IoT, and CPaaS (Communication Platform as a Service). The earnings call highlighted:
- IoT: Growing rapidly with strong market share.
- Cloud: A “platform” business model with three layers (Data, Workflow, Channels) built on Airtel’s own cloud infrastructure. This isn’t just reselling public cloud but building its own telco-grade, India-hosted cloud. The total cloud market is estimated at ₹60,000 Crores, offering substantial headroom.
- Software (Xtelify): Seen as an even bigger opportunity globally for telcos, with high margins and very low capex.
This “war on waste” approach, where low-margin business is shed to free up resources for more profitable ventures, is a positive signal for future earnings quality. While the B2B segment’s EBITDA share is currently modest (around 10%), its high growth potential and strategic importance to the digital ecosystem make it a key area to watch for long-term value creation.
Broadband Momentum: Winning the “Wi-Fi Game”
Airtel’s broadband business recorded record quarterly net additions of 939,000, including a strong 5.4 lakh from Fixed Wireless Access (FWA). This aggressive push is part of a broader strategy to “win the Wi-Fi game” in homes. The company aims to accelerate its fiber home passes rollout to a quarterly run rate of 2.5 million, up from 1.6 million.
This two-pronged strategy – fiber where viable and FWA where it’s not – significantly expands Airtel’s addressable market. The bundling of content (like the Google One cloud storage partnership) and expanding channel footprint are smart moves to drive adoption and reduce churn. This segment’s robust growth contributes to diversifying Airtel’s revenue streams and leveraging its extensive network infrastructure.
Financial Health: Strong Margins & Deleveraging Continues
Airtel’s financial statements paint a picture of improving health:
Table: Consolidated Financial Highlights
| Particulars | Unit | Jun-24 | Jun-25 | Y-o-Y Growth |
|---|---|---|---|---|
| Total revenues | Rs Mn | 418,605 | 494,626 | 18% |
| EBITDA | Rs Mn | 230,259 | 281,668 | 22% |
| EBITDA / Total revenues | % | 55.0% | 56.9% | 1.9 pp |
| Operating Free Cash Flow | Rs Mn | 132,971 | 198,598 | 49% |
| Net Debt | Rs Mn | 1,876,206 | 1,915,794 | 2% |
| Profit after tax (before exceptional) | Rs Mn | 46,021 | 74,218 | 61% |
| Net income (before exceptional) | Rs Mn | 30,206 | 59,479 | 97% |
| Capex | Rs Mn | 97,288 | 83,070 | -15% |
Note: Historical financials have been re-casted due to Indus Towers consolidation.
The EBITDA margin improved by 1.9 percentage points YoY to 56.9%, showcasing strong operational efficiencies and the beneficial impact of ARPU growth. Operating Free Cash Flow (EBITDAaL minus Capex) surged by a massive 49% YoY to ₹198,598 Crores. This robust cash generation is critical for funding future growth and deleveraging.
The company continued its deleveraging journey, redeeming a billion dollars worth of senior notes. India’s net debt to EBITDAaL now stands at a comfortable 1.3, leading to a credit rating upgrade by Crisil. While net debt in INR terms saw a slight increase, the underlying improvement in leverage is clear, positioning Airtel as a stalwart with strong financial discipline and capacity for future investments.
Capital Expenditure: Smart & Strategic, Not Just More
Consolidated CapEx saw a 15% YoY decrease to ₹83,070 Crores. Management clarified that Q1 capex was lower seasonally (often averaged with Q4 for a true run rate) and that radio capex is trending down. However, transport capex (fiber, core networks) and non-wireless capex (B2B, data centers, homes) continue to be strong. The modular nature of cloud capex allows for capacity additions as needed, with a short gestation period of 3-6 months.
This indicates a shift from broad-based network rollout to more targeted, growth-oriented investments. The ongoing investment in fiber networks is crucial for low latency services, submarine cables, and supporting the burgeoning Cloud and Cybersecurity businesses. The focus is on sweating existing deployments and redeploying resources efficiently. This strategic CapEx deployment, coupled with improving free cash flow, suggests that future earnings growth will be supported by well-planned, high-return investments.
Bharti Hexacom: A Steady Regional Player
Bharti Hexacom, a subsidiary operating in Rajasthan and Northeast India, reported a steady quarter with revenue of ₹2,263 Crores and EBITDAaL of ₹1,079 Crores (margin 47.7%). Its ARPU also saw a healthy increase to ₹246. The company added 17,000 mobile customers and 54,000 home customers.
Hexacom’s performance aligns with Airtel’s broader strategy, leveraging group partnerships for value-added services like Perplexity AI and Google One storage. The company’s balance sheet remains robust with low debt. Management indicated that future CapEx would marginally unwind as the main rural acceleration program has largely occurred, but investments for 5G deployment and site expansion will continue as needed. Hexacom’s lower Wi-Fi penetration in its circles suggests that FWA might play a larger role in connecting homes compared to more urbanized areas.
Investment Insight: A Domestic Growth Story on Solid Footing
Airtel’s Q1 FY2026 results reinforce its position as a fast grower within the Indian telecom space, transitioning towards a stalwart status. The company is effectively navigating a competitive landscape by focusing on:
- Quality ARPU growth: Driven by value-added services and upgrades, not just basic tariff hikes.
- Strategic B2B transformation: Shifting towards high-margin, sticky digital services (Cloud, Cybersecurity) that leverage its core network strength.
- Aggressive home broadband expansion: Capturing the “Wi-Fi game” through both fiber and FWA.
- Disciplined capital allocation: Smart CapEx for growth and continued deleveraging.
The robust GDP growth projections, easing inflation, and stable interest rates in India provide a strong macro tailwind for domestic consumption stories like telecom. While the broader market faces uncertainty and FPI outflows, Airtel’s strong domestic focus and consistent performance make it an attractive proposition within the preferred “domestic-growth themes.”
Key Takeaways for Future Earnings:
- ARPU trajectory: Continued ARPU growth remains critical. Watch for sustained postpaid conversions and data monetization strategies.
- B2B execution: The success of the Cloud and Cybersecurity ventures will be key. Track underlying revenue growth and order book visibility.
- Broadband momentum: The targeted 2.5 million fiber home passes/quarter is an aggressive goal. Its achievement will significantly contribute to future revenue diversification.
- Operational efficiencies: The “War on Waste” and improved margins suggest continued focus on profitability.
Airtel has laid a strong foundation in Q1 FY2026, demonstrating both growth and financial prudence. The company’s strategic shifts in B2B and home broadband, coupled with its strong balance sheet, position it well to capture future growth in the evolving Indian digital economy.
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