Telecom stocks rally on tariff hike; Bharti Airtel up 10%, RIL at new high

Shares of telecom services providers rallied up to 10 per cent on the BSE in the early morning deals on Monday on the back of tariff hike plan.

Among individual stocks, Bharti Airtel surged 10 per cent to Rs 486, also its fresh 52-week high on the BSE. Reliance Industries (RIL), the parent company of Reliance Jio, hit a new high of Rs 1,614, up 4 per cent, while Vodafone Idea (VIL) soared 24 per cent to Rs 8.44 on the BSE.

Bharti Airtel and VIL on Sunday announced a tariff hike in the range of 15 per cent and 40 per cent across different plans. The tariff hike by both companies will be applicable from December 3, 2019.

“Airtel’s new plans, represent tariff increases in the range of a mere 50 paise/day to Rs. 2.85/day and offer generous data and calling benefits,” Bharti Airtel said in a press release.

In addition, Airtel provides exclusive benefits as part of the Airtel Thanks platform, which enables access to premium content from Airtel Xstream (10,000 movies, exclusive shows, and 400 TV channels), Wynk Music, device protection, anti-virus protection and much more, it added.

Reliance Jio also said it would be introducing new plans with unlimited voice and data. These plans will have a fair usage policy for calls to other mobile networks. The new plans will be effective from December 6, 2019.

“Although the new all-in-one plans will be priced up to 40 per cent higher, staying true to its promise of being customer-first, Reliance Jio customers will get up to 300 per cent more benefits,” Reliance Jio said in a release.

“The price hike on smartphone bundle plans is to the tune of about 30 per cent, implying about Rs 200 monthly spend on popular 1.5GB – three monthly plans. Both Bharti and VIL also increased their minimum recharge plans from Rs 35/Rs 65 to Rs 49/Rs 79, which should see estimated increase of 30 per cent to Rs 53 from Rs 40 earlier,” Motilal Oswal Financial Services (MOFSL) said in a note.

Given the dual simcard phenomenon, expect market share loss for weaker players – Vodafone Idea, as this could also trigger simcard consolidation and subsequently see subscriber churn. Bharti, on the other hand, could see lower operating leverage but healthy free cash flow (FCF) generation and improving balance sheet with healthy 50 per cent plus potential upside, the brokerage firm said in a sector update.

Minutes later; however, telcos pared early morning gains.  At the time of writing of this report, Vodafone Idea was up 18 per cent at Rs 8.03) and Bharti Airtel was ruling 7 per cent higher at Rs 475 on the BSE. RIL was up 3 per cent at Rs 1,600, as compared to 0.48 per cent rise in the S&P BSE Sensex.

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