UBS has shared its latest insights into the Indian telecom sector, upgrading Indus Towers to ‘Buy’ with a target price of ₹425, while maintaining a ‘Neutral’ stance on Bharti Airtel with a target price of ₹1,707. The brokerage has also retained its ‘Buy’ rating on Vodafone Idea but reduced its target price to ₹13 from ₹19, citing evolving dynamics in the sector.
UBS on Indus Towers: Positioned for dividend surprises
UBS believes that Indus Towers is well-positioned to deliver meaningful dividend payouts in the future. This outlook is driven by a shift in growth drivers from Bharti Airtel’s tower rollouts to Vodafone Idea’s expansion, which entails minimal incremental capex. Additionally, Vodafone Idea’s continued payments to clear past dues further strengthen the company’s ability to generate healthy dividends. UBS highlights the potential for Indus Tower to deliver shareholder value amid these positive developments.
UBS on Vodafone Idea: Relief measures critical for growth
UBS forecasts Vodafone Idea’s mobile revenue growth at 2.8% quarter-on-quarter, as residual benefits from tariff hikes are offset by an estimated subscriber churn of 3.5 million. Looking forward, the brokerage identifies potential relief on statutory dues—such as AGR and spectrum liabilities—as a critical growth catalyst. UBS suggests that this relief could take the form of equity conversion, deferrals, partial reductions, or a combination thereof. Despite the challenges, UBS highlights the stock’s attractive risk-reward ratio, with potential upside from such relief measures.
Sector Outlook
UBS remains cautiously optimistic about the telecom sector, noting the evolving dynamics of tariff adjustments, subscriber retention, and regulatory support. Indus Tower’s strong dividend prospects and Vodafone Idea’s potential for policy-driven gains are key factors in the brokerage’s analysis.
