Shares of telecom companies rose on Monday after the telcos raised tariffs for prepaid subscribers by effectively up to 40 percent.
In intra-day deals, Bharti Airtel rose as much as 10 percent to hit its 52-week high of Rs 485.75 per share. Reliance Industries also hit its 52-week high of Rs 1,614, up 4 percent, while Vodafone Idea surged 23.5 percent to Rs 8.44.
At 9:35 am, Bharti Airtel was up 9 percent at Rs 482, Vodafone Idea rose 15 percent at Rs 7.80, and Reliance Industries added 3.6 percent at Rs 1,606.80 per share. In comparison, the BSE Sensex was 0.4 percent or 163 points up at 40,957.
While Bharti and Vodafone Idea announced tariff hikes of 15 to 40 percent, Jio announced a tariff hike of up to 40 percent for its all-in-one plans. The new tariffs will come into effect from Wednesday for Vodafone Idea and Bharti Airtel customers, and from Friday for Reliance Jio subscribers.
The likely increase in tariffs is set to improve the profitability of these companies and ease worries in the financially troubled sector, which had worsened on the back of the Supreme Court order defining adjusted gross revenue.
According to global brokerage Credit Suisse, Bharti Airtel’s and Vodafone Idea’s price hike was in-line with estimates. It is constructive on Bharti Airtel as the company is well-positioned to capitalise on pricing recovery. However, It remains 'neutral' on Vodafone Idea, adding that Vodafone would need another round of capital infusion by FY23.
Credit Suisse also expects more tariff increases over the next 12-18 months. It expects Bharti and Vodafone Idea’s Q4 EBITDA to increase by 15 percent and 54 percent QoQ.
Meanwhile, BofAML also has a 'buy' rating on Bharti Airtel and Reliance Industries on tariff hike. It added that price hike by Vodafone Idea and Bharti Airtel was better than expectations. It also expects more tariff hikes to follow.
Kotak believes that Vodafone Idea and Bharti Airtel’s hikes should yield a Rs 25-30 increase in blended ARPUs. Vodafone can see an EBITDA uptick of Rs 8,000-9,500 crore and Bharti Airtel by Rs 7,000-8,500 crore.
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