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Telecom stocks surge over 4% after govt approves relief package for sector; Vodafone Idea gains 2%

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Telecom stocks -- Vodafone Idea (VIL), Bharti Airtel (BAL), Reliance Industries (RIL), and Tata Teleservices (TTML) -- rallied after the government approved a relief package for the sector.

Telecom stocks surge over 4% after govt approves relief package for sector; Vodafone Idea gains 2%
The S&P BSE Telecom index rallied over 4 percent Wednesday after the Cabinet approved a relief package for the telecom sector. According to sources, the government has announced a moratorium of 4 years on the payment of adjusted gross revenue (AGR) dues. CNBC-TV18 had earlier reported this. However, the fine print of the details is still awaited.
The shares of Vodafone Idea Ltd (VIL) surged over 2 percent on the news. At the time of writing, the shares were changing hands at Rs 8.88, having hit the high of Rs 9.30 earlier in the session.
Bharti Airtel Ltd stocks jumped over 5 percent post-announcement, with shares rising as high as Rs 734 — also a 52-week high. At the time of writing, Airtel shares were changing hands at Rs 733. Not just that, Bharti Airtel shares have crossed the 700-level for the first time.
With the shares hitting fresh record highs, the market share of BAL surged to Rs 4 trillion for the first time. It became the twelfth Indian firm to cross this level.
The scrip of Reliance Industries Ltd (RIL) surged over a percent higher, rising as high as Rs 2,395 from the previous day's close. At the time of writing, the shares were changing hands almost half a percent higher at Rs 2,380.
Meanwhile, Tata Communications stocks were trading a smidge lower than 1 percent at Rs 1,369.
While the fine print is still awaited, sources had earlier told CNBC-TV18 the centre will grant relief prospectively and on spectrum usage charges (SUC). Bank guarantee cuts are unlikely for the existing spectrum dues.
The government is likely to balance the four-year moratorium period by shifting the dues to remaining installments, including interest with additional interest. It is this additional interest on dues the government plans to convert into equity.
It is also understood the AGR definition is likely to be revised to ensure it only includes telecom-based activities. If this happens, it will be prospectively and not in retrospect. So a large chunk of this relief package would be focused on future dues.
This comes after Kumar Mangalam Birla, the former chairman of Vodafone Idea, reportedly met with Telecom Minister Ashwani Vaishnaw. Birla spoke with Vaishnaw about the ailing condition of the telecom sector and the urgent need for government intervention.
Earlier in September, various officials of the Department of Telecommunications (DoT) were understood to have had regular meetings with the senior executives of VIL.
Earlier in June, Birla had also offered to hand over his stake in the cash-strapped telco to keep it a going concern, for the sake of "27 crore Indians connected with Vodafone Idea."
The total amount of AGR dues as per DoT are Rs 119,292 crore. Telcos like BAL, VIL and Tata Teleservices are expected to pay, with VIL's dues being the highest.
VIL is expected to pay dues worth Rs 51,400 crore (as of September) and without any government intervention, the company might have to shut its shop, Birla had said earlier.
AGR is a fee-sharing mechanism between telcos and the centre. Under this, telecoms are expected to pay a percentage of AGR with the government. However, the companies and government are locked in a legal battle over the definition of AGR for over a decade.