Telecom Stocks Ringing Gains; Bharti Airtel, Vodafone Idea Surge
Telecom heavyweights, Bharti Airtel has zoomed by 5.7% at Rs 432 and Vodafone Idea has spiked by 21.2% on the BSE after these companies announced plans to hike mobile phone calls and data tariffs from December 1. This would be the first price hike in more than a decade as telecom companies have been suppressing prices in order to remain competitive. The BSE Telecom index was trading 6.2 per cent up at 1,059 around 10:45 am (IST), inching towards its 52-week high of 1093.
Among other telecom shares, Idea Cellular (up 20 per cent at Rs 5.38), Himachal Futuristic Communications (up 1.4 per cent at Rs 17.35), OnMobile Global (up 10.82 per cent at Rs 36.25), Tejas Networks (up 19.96 per cent at Rs 81.45), Aksh Optifibre (up 1.7 per cent at Rs 6) were also trading with significant gains in the telecom index. On the other hand, ITI (down 0.6 per cent at Rs 87.45) and Vindhyatel (down 0.2% at Rs 782) bucked the trend on the BSE.
In a related development, Jefferies upgraded Bharti Airtel to 'hold' from 'underperform' and raised its target price to Rs 407 per share, post the announcement about tariff hike. There is also hope that the government may announce some financial relief for Vodafone Idea and Bharti Airtel in the form of a waiver or deferred payment terms. These developments have brought much-needed cheer to the much-beleaguered sector.
There had been a string of negative news leading up to the telecom tariff hike announcement. Last Friday, Bharti Airtel and Vodafone Idea reported record losses for the quarter ended September 30.
Vodafone Idea's net loss of Rs 50,921.9 crore for the three-month period marked the biggest quarterly loss in India's corporate history. The company had then said that provisions for outstanding government dues and penalty due to a one-time charge of Rs. 25,677.9 crore by the telecom department affected its financial performance. Bharti Airtel's net loss came in at Rs 23,045 crore, after it made a provision of Rs 28,450 crore following the Supreme Court ruling.
In its statement on Monday, Vodafone Idea - the country's largest telecom operator by subscriber base - said there is "acute financial stress in the telecom sector" and a high-level Committee of Secretaries headed by the Cabinet Secretary is looking into providing appropriate relief.
Last month, the Supreme Court upheld a demand by the Department of Telecommunications (DoT) and rejected telecom companies' appeal against the government's definition of adjusted gross revenue (AGR). The top court allowed the DoT to recover dues worth Rs. 1.33 lakh crore from telecom companies.
The DoT and the mobile carriers have been at odds over the definition of AGR. The companies argue that AGR should comprise just revenue accrued from core services, while the DoT says AGR should include all revenues.
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