New Delhi [India], July 11 : The Indian telecom sector appears to be entering a phase of stagnation, with global investment bank UBS issuing a cautious outlook ahead, going into the sector's Q1FY26 results.
According to UBS, the telecom sector is described as lacking near-term catalysts and being priced for perfection, with growth expectations potentially outpacing actual market dynamics.
UBS further notes that while a 10-12 per cent tariff hike is expected later in FY26, the probability of a delay remains high. Indian mobile tariffs are now in line with other emerging markets, and entry-level plans are already priced at the high end relative to per capita GDP. This could limit operators' ability to go for further price increases, especially for lower-end users, thereby restricting overall revenue growth.
The upcoming quarter is forecasted to be uneventful, with modest revenue growth and subdued operational momentum. Subscriber additions are expected to be weak, and any improvement in average revenue per user is likely to be incremental. This suggests limited upside in financial performance unless significant strategic changes occur.
UBS highlights that the sector's valuations have become expensive, particularly in comparison to regional peers.
Despite improving cash generation, dividend payouts in the sector remain low relative to global benchmarks, further reducing its attractiveness to yield-seeking investors.
The broader macro view also suggests that telecom spending in India, as a share of GDP, has reached levels comparable with other emerging markets, leaving little room for accelerated growth through pricing alone.
With competitive pressures intensifying and regulatory or policy support uncertain, the outlook remains challenging. UBS's stance signals a defensive posture, suggesting the sector may face headwinds that are not yet fully reflected in current valuations.
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