Bharti Airtel Ltd has delivered an impressive sequential gain of 2.4% in average revenue per user (Arpu) for the September quarter (Q2FY26), rising to ₹256. In comparison, Reliance Jio reported a modest 1.2% growth to ₹211.4.
What explains Airtel’s faster Arpu growth? Two key factors stand out. First, its 2G user base—derived by subtracting 4G and 5G subscribers from total mobile users—fell 4.5% quarter-on-quarter to 78.37 million. As more 2G customers migrate to higher-priced 4G/5G plans that offer greater data usage, overall Arpu rises.
Second, Airtel continues to benefit from a higher proportion of post-paid users than Jio. Its post-paid base grew 3.6% sequentially to 27.52 million in Q2. Post-paid customers are typically premium subscribers who generate stronger Arpu. Notably, Jio neither discloses its post-paid base nor has any 2G subscribers.
The question now is whether Airtel’s Arpu can surprise further. That seems likely. Even now, 2G users make up 21% of Airtel’s total mobile subscriber base, and their gradual shift to 4G/5G plans will keep supporting Arpu growth. Its post-paid base, too, has expanded by 12% over the past year, a trend likely to continue.
Excluding Arpu gains, which drove Airtel’s India wireless revenue up 2.6% sequentially, the other revenue lever, volume or subscriber growth, was tepid at 0.4%. The Arpu uptick helped lift the wireless segment’s Ebitda (earnings before interest, taxes, depreciation and amortization) margin by 90 basis points quarter-on-quarter to 60.3% as operating leverage improved.
Capital allocation focus
Beyond these operating metrics, Airtel’s recent capital allocation decisions merit closer attention. The board has approved the purchase of up to an additional 5% stake in Indus Towers Ltd, implying a potential cash outlay of around ₹5,000 crore based on Indus’s latest market capitalization. Indus is already a subsidiary of Bharti with 51% holding, which means the latter’s financials are fully consolidated into Airtel’s accounts. A higher stake, therefore, won’t alter Airtel’s reported consolidated revenue or Ebitda.
Airtel also has sufficient management control over Indus. So, why raise its stake further? In the Q2FY26 earnings call, Airtel’s management stated that they are looking at Indus as a strong dividend-paying asset. However, Indus’s ability to pay generous dividends, at least in the near future, has already become questionable after it recently announced that it would expand into the tower business in Africa.
Separately, Airtel has also indicated interest in increasing its stake in Airtel Africa Plc—another potential cash outflow, albeit one that could be comfortably funded by its robust wireless cash generation.
Another notable takeaway from the Q2 call was Airtel’s plan to approach the government for a recalculation of adjusted gross revenue (AGR) related dues, following the Supreme Court’s ruling in the Vodafone Idea case. Airtel currently owes the government about ₹40,000 crore in AGR liabilities. Still, it appears unlikely that Vodafone Idea’s case will set a precedent, given that the government is both a creditor and the majority shareholder in that company.
For investors, any potential AGR relief remains speculative. Instead, attention may soon shift to Jio’s upcoming IPO and its valuation—developments that could influence Airtel’s market re-rating. The Airtel stock has already gained 34% so far in 2025, outperforming 8% returns of the Nifty 50. Yet, its valuation remains reasonable at an EV/Ebitda multiple of 10 times based on FY27 estimates from Motilal Oswal Financial Services.
