Telecom is the new petrol: Why Bharti Airtel could be a money machine

Bharti Airtel's share price has risen over 16 percent since the beginning of the year

Telecom “is like petrol — you have to just fill it,” and that makes a strong investment case for Bharti Airtel as a high-growth compounder in a capital-intensive industry, says Kunal Vora, Head of India Equity Research at BNP Paribas.

Vora said the company’s channel checks to gauge consumer response to telecom tariff hikes revealed that users now view mobile charges like petrol prices — a necessary expense that cannot be avoided, even with price increases. This, he said, sets the stage for sector leaders to comfortably implement tariff hikes, if not annually, then at least every alternate year, ensuring a steady rise in revenues year after year. Besides, the industry structure also favours investing in a company like Bharti Airtel, Vora said.

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"Telecoms right now is a sector in which the dynamics are much better compared to what we had in history,” Vora said. He points out that ten players once competed aggressively; today, “the minimum threshold requirement for entry into the sector will be $25 billion and even if you want to enter, you do not have spectrum available."

That scarcity underpins Airtel’s ability to raise pricing every two years, he added. “A company like Airtel will report like 18–19 percent revenue growth when there is tariff hike and 8–9 percent growth when there is no tariff hike. So, on a compounding CAGR basis, it is growing at 13–14 percent."

When being asked if the valuations were excessive even on a discounted cash flow basis, Vora agreed but defended that DCF models "do not work for many sectors" in India, given the gulf between actual valuations and market pricing. Instead, he focuses on structural relevance: today’s telecom ARPUs are back to decade-high levels after a steep decline and recovery, he notes. "If you think about the relevance of the service… it is your lifeline. When the last tariff hike happened… customers said, ‘It is like petrol; you have to just fill it. When there is no option but to pay."

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Airtel’s P/E multiple of about 22–25x FY27 earnings looks undemanding against consumer staples trading at 45–50x, he argues: "While P/E is not a great method… on an EVA-BETA basis, you have a multiple of about 12x which looks expensive compared to its own history, but everything in India is expensive compared to its history."

On the question of growth triggers, considering that mobile penetration in India are already high, limiting growth through higher reach, Vora said, he sees multiple other growth levers for Airtel: 5G upgrades, market share gains by larger players, home broadband expansion, enterprise solutions and data-centre services. This diversification, combined with declining capex and no spectrum auctions for years, supports a bullish stance, he said.

"In the context of what is available in the market,” he said, “I expect Airtel to grow at least 2x consumer staples."

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