Telco shares zoom on tariff hike

Photo for representational purposes.

Photo for representational purposes.  


RIL, Airtel shares touch new 52-week high, Vodafone breaches upper circuit limits

Shares of Mukesh Ambani-led Reliance Industries (RIL) and Sunil Bharti Mittal-led Bharti Airtel touched a new 52-week high of ₹,1614 and ₹485.75 on Monday, while shares of Vodafone Idea breached their upper circuit limits of ₹7.51 after the telcos announced tariff hike for pre-paid customers on Sunday.

RIL shares were trading up 2.54% at ₹1,590.25 in a flat Mumbai market on Monday, valuing the company at ₹10,08,211.5 crore.

While Vodafone Idea and Bharti Airtel have increased tariffs by 15-47% across prepaid plans from December 3, Reliance Jio will also hike the tariffs by up to 40% from December 6.

Shares of Bharti Airtel on BSE were trading up 7.31% at ₹474.65, valuing it at ₹2,43,639.89 crore, while Vodafone Idea shares were trading up 21.96% at ₹8.33, valuing the company at ₹23,956.31 crore.

The three telecommunication giants together account for over 90% of India’s 1.18 billion mobile subscribers, with the market share of around 30% each split evenly among them.

“Tariff hike came as a lifeline for the debt-laden telcos like Vodafone Idea and Bharti Airtel. More hikes are anticipated in the coming quarters to keep the sector healthy and investors’ wealth protected,” Paras Bothra, President - Equities, Ashika Stock Broking, told The Hindu.

Jefferies Equity Research anticipates the revenue increase to be between 11-23%, lower than hikes due to data elasticity resulting in downtrading and SIM consolidation, no increase in postpaid and lower hike in voice.

According to Motilal Oswal equity research, Bharti Airtel is likely to benefit from higher ARPU (average revenue per user) as the free cash flows will improve its liquidity position. However, for Vodafone Idea, given the continued negative free cash flow position, worries still linger despite the ARPU increase.

“Market share loss could dilute gains: VIL continues to face loss of subscribers/revenue market share,” said Motilal Oswal in a research note.

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Printable version | Dec 7, 2019 11:01:21 AM |

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