Why Foreign Investors Are Dialling into Telecom Stocks

Foreign Investors Tune into India’s Telecom Sector: Here's Why the Buzz Is Growing Louder

As India’s digital economy continues its upward trajectory, foreign institutional investors (FIIs) are making calculated moves into the telecom space. After years of muted enthusiasm, telecom stocks are now enjoying a fresh wave of investor confidence. Companies like Bharti Airtel and Reliance Jio have seen renewed interest on the back of improved earnings visibility, 5G rollout potential, rising average revenue per user (ARPU), and supportive policy initiatives.

Let’s explore the key drivers behind this strategic shift and what it means for investors going forward.

Sector Transformation: From Liability to Lucrative

India’s telecom sector has come a long way from the debt-laden, price-war-ridden landscape of the past. The market has now consolidated into a virtual duopoly, with Bharti Airtel and Reliance Jio commanding a lion’s share. Vodafone Idea continues to struggle with funding, leaving more ground for the top two to cover.

This consolidation has led to improved pricing power, better capital efficiency, and a shift from subscriber growth to profitability—a change foreign investors value highly.

Ravi Singhal, CEO of GCL Broking, explains,

“Foreign investors are attracted to the improving fundamentals of Indian telecom players. With 5G rollouts underway, the sector is moving towards higher ARPU and lower customer churn, both of which are key metrics for long-term valuation.”

Rise in ARPU: A Sign of Pricing Discipline

ARPU has become the defining metric for investor sentiment. Over the past few quarters, both Jio and Airtel have managed to increase ARPU steadily, thanks to tariff hikes and premiumization of services.

• Bharti Airtel reported an ARPU of ₹209 in Q4 FY24, a significant jump from ₹193 a year ago.

• Reliance Jio clocked an ARPU of ₹182, with management signaling more tariff rationalization soon.

This focus on quality subscribers, data consumption, and value-added services has resulted in improved revenue visibility, making these companies more attractive to FIIs.

5G Rollout: Fueling the Next Growth Wave

The aggressive rollout of 5G networks across metro and tier-2 cities is a major catalyst. Bharti Airtel has completed its 5G rollout in over 15,000 towns, while Reliance Jio has committed to a pan-India 5G network by the end of 2025.

5G is expected to bring exponential data usage, IoT applications, and private enterprise solutions—all of which will generate new monetization avenues.

Nirav Dalal, Telecom Analyst at Anand Rathi, notes,

“5G is not just a consumer story—it’s an enterprise opportunity. Foreign investors are betting on the long-term infrastructure play that Indian telcos represent.”

Government Policy & PLI Scheme: A Tailwind

Supportive government policy is another factor nudging FIIs toward telecom. The relief package announced in 2021, including a four-year moratorium on AGR dues and the rationalization of spectrum usage charges, helped stabilize the sector.

Further, the Production-Linked Incentive (PLI) scheme for telecom gear manufacturing has spurred domestic production and reduced reliance on Chinese equipment—another plus in the eyes of global investors.

FII Inflows and Shareholding Patterns

Data from stock exchanges show that FIIs have steadily increased their holdings in Bharti Airtel and Reliance Industries (the parent company of Jio Platforms) over the past three quarters.

• In Bharti Airtel, FII holding rose to 20.76% in Q4 FY24, up from 19.03% in Q2 FY24.

• In Reliance Industries, Jio remains a key valuation driver, especially after the recent demerger buzz surrounding Jio Financial Services and possible listing plans for Jio Platforms.

Private equity players such as Silver Lake, KKR, and Vista Equity Partners have already invested over $20 billion in Jio Platforms, indicating long-term confidence in India’s telecom and digital story.

Digital India, Rural Penetration, and New Revenue Streams

India’s push towards digitization—via initiatives like Digital India, BharatNet, and ONDC—is deepening telecom penetration in rural markets. Increased data usage, mobile payments, e-commerce, and OTT consumption are all tailwinds for telecom.

Telcos are also tapping into adjacent verticals:

• Airtel’s Wynk, Xstream, and Airtel Payments Bank

• Reliance’s JioCinema, JioMart, and Jio Financial Services

These ecosystem plays are improving customer stickiness while offering multiple revenue levers.

Investor Outlook: A Long-Term Play on India’s Digital Growth

While some short-term profit booking can’t be ruled out, the telecom sector is now on firmer footing. The heavy capex in recent years is beginning to pay off with improved margins, cash flows, and customer metrics.

Brokerages such as Jefferies and Morgan Stanley have issued overweight calls on Bharti Airtel and Reliance Industries, citing improved sector dynamics and 5G monetization as key reasons.

Anjali Verma, Head of Equities at Prime Capital, states,

“The Indian telecom sector is no longer a high-risk, high-debt play. It’s a digital infrastructure story with earnings visibility, long-term growth, and institutional interest. That’s a sweet spot for foreign investors.”

Foreign investors are no longer sitting on the sidelines when it comes to Indian telecom. Backed by structural reforms, technological upgrades, and improving financials, the sector is emerging as a strong long-term bet. With India’s digital ecosystem expanding rapidly, telecom stocks may well be the dial-up to future-ready portfolios.