Telecom stocks have been in focus of late on the back of two developments, Bharti Airtel hiking prepaid tariff plan to Rs 45 for 28 days and reports of telecom companies not getting input tax credit refund.
Speaking to CNBC-TV18, Rajiv Sharma, head of research at SBICAP Securities, reviewed the latest happenings in the sector.
"The tariff was around Rs 25 early this year and around November it was hiked to Rs 35 and now it has gone to Rs 45. Given the tariff hikes which were announced early December, we have already built in this hike coming in our numbers,” he observed.
Talking about ARPU for Bharti, he said, “We are expecting around 25-27 percent increase in ARPU in FY21 over FY20. We do expect another round of tariff hike to come in. That will be around 8 percent but it will be another 6-9 months away.”
“Vodafone-Idea should follow suit and announce a similar increase. If not it is only Vodafone-Idea and Bharti which operate in this segment as Jio is not present in pure calling prepaid voice segment. So there could be some churn but it will be very circle specific but given that Bharti has a better edge on network even in 2G – that churn may not be meaningful,” he pointed out.
Speaking about input tax credit refund, Sharma said, “Nobody was building this in numbers but there was a hope that this was doable but given that the government is finding tough to meet its own GST expectation it always looked difficult.”
On Vodafone-Idea AGR issue, he said, “They have not announced any fund-raising plan unlike Bharti and Kumar Mangalam Birla has clearly mentioned about shutting down shop if there is no relief. So it is clear that if there is a relief it may go the way Birla has suggested.”Disclosure: Reliance Industries, the parent company of Reliance Jio, owns Network 18 that publishes CNBCTV18.com.