Telecom shares in focus; Vodafone Idea up 12%, Bharti Airtel gains 3%

In the middle of optimism of tariff hikes in the coming months, the shares of telecom service providers focused on the stock exchanges on Tuesday. Among individual stocks, Vodafone Idea (Vi) jumped 12% in the early morning deal to Rs. 10.20 (US$ 0.14) after a media report indicated that by the end of the year or early next year, Vi is considering raising tariffs by 15-20%.

This is on the planned terms, according to analysts, as the organisation is grappling with cash burn and looking to raise funds.

The stock was trading 7% higher at Rs. 9.74 (US$ 0.13) at 09:44 am, compared to a 0.64% increase in the S&P BSE Sensex. Trading volumes on the counter nearly doubled until the date of writing of this article, with a combined 370 million equity shares changing hands on the NSE and BSE.

On the other hand, Bharti Airtel's shares were up 3% to Rs. 495 (US$ 6.66), its highest level since September 21, 2020. The stock has jumped 26% from its low of Rs. 394 (US$ 5.30) hit in October with today's gain.

The stocks of Vodafone Idea (up 8%) and Bharti Airtel (down 6%) have been underperforming the S&P BSE Sensex in the past three months, which earned 15.5% over the same period.

ICICI Securities analysts assume that a higher 4 G subscriber base would allow Bharti to better shift tariff hike as it happens to average revenue per user (ARPU).

In several ways, Bharti's India mobile print shows marked progress, such as growth in total subs without ARPU dilution showing consumer addition quality; lower churn rate growing customer lifetime value and continued delivery of 4G net add, which is now likely to match the market leader. Our FY21 estimates had a downside risk of tariff hike delay. However, strong Q2FY21 performance has offset much of it," the brokerage firm stated in result update with 'BUY' rating on the stock

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.