Airtel’s ongoing discussions to merge its DTH business with Tata Sons’ Tata Play signal a deeper push into broadband, pay-TV, and enterprise connectivity.
Analysts see the move as a strategic pivot to monetize its 5G investments beyond mobile tariff hikes. However, with the pay-TV business in structural decline and execution risks looming, the success of this expansion remains a key question.
Airtel egde and market sentiment
Airtel’s December quarter results reinforced its industry lead.
The company added nearly 5 million new subscribers, lifted its average revenue per user (ARPU) by 5%, and posted a 41% sequential surge in net adjusted profit to ₹5,500 crore.
Read this | Telecom Q3 review: Airtel triumphs in Arpu battle, but Jio could win the war
Yet, despite these strong numbers, Airtel’s stock remains 12% below its September peak, weighed down by broader investor caution.
“It (the DTH merger plan) is a step in the right direction, which will improve Airtel’s functionality in the future. But relentless selling by foreign portfolio investors in large-cap (stocks) has overshadowed sentiment around this development,” said Piyush Pandey, telecom, internet, and IT analyst at Centrum Broking.
The contrast with rivals is stark, though.
Reliance Industries, Jio’s parent, has seen its stock slide 26% from its 52-week high, while Vodafone-Idea shares have plummeted 61%, reflecting the broader challenges in India’s telecom sector.
The push into home services
Airtel’s home services ambitions were a key focus in its latest earnings call. The company plans to ramp up investments in home broadband, data centres, and enterprise services—segments that offer higher margins and long-term potential.
The Tata Play merger would give Airtel access to an additional 20 million premium households, allowing it to bundle services and extract better returns on its 5G investments, said Vivekanand Subbaraman, lead telecom analyst at Ambit Capital.
“At a time when the DTH business is in a terminal decline, the best strategy is to use that platform to cross-sell and up-sell your other products to a new set of premium customer base,” said Sumanta Khan, senior fund manager at Edelweiss Mutual Fund.
However, the bigger question is whether the Tata Play deal will be an asset or a liability, given the shift toward streaming services.
Flush with cash
Unlike previous capex-heavy years, Airtel is now flush with cash.
With its 5G-related spending peaking in FY24, the company is generating over ₹10,000 crore in quarterly free cash flow, according to a Nuvama Institutional Equities report.
Airtel’s management expects 5G capital expenditure to decline further in FY26, leaving more cash available for new ventures.
Still, 5G monetization remains a challenge beyond ARPU hikes. Airtel is betting on fixed wireless access, fibre-to-home, and private 5G networks as new revenue streams.
“They will realise the tail end of the latest tariff hike in Q4. So, while sequentially earnings growth might slow down, albeit on a high base, on a yearly basis (from FY24 to FY25) their total income will swell,” noted Subbaraman.
Additionally, a slew of cricketing events in the current quarter will drive higher data consumption and monetization opportunities, incrementally boosting profitability, Subbaraman noted. However, its gradual exit from the low-margin submarine cables business will weigh on revenue growth in the near term, he added.
Airtel’s ability to sustain its industry lead will depend on how well it executes this strategic shift. The home services business offers a potential growth engine, but competitive pressures—especially from Jio’s aggressive broadband expansion—remain a key risk.
For now, analysts remain optimistic.
Airtel already bundles mobile, DTH, and broadband under Airtel Black as part of its premiumization strategy. If it successfully scales its home services business, it could drive stronger profitability and better returns on its 5G investments.
Also read | Gopal Vittal at Airtel: A stint of multiple challenges, in charts
Despite structural challenges in the telecom sector—including low returns on capital employed—analysts believe Airtel’s strategy positions it for better equity returns in the medium term.
