Telecom stocks under pressure; Airtel, Voda Idea hit over three-month lows

In the past one month, Bharti Airtel has slipped 12 per cent, while Vodafone Idea has dipped 23 per cent, as compared to 5 per cent decline in the S&P BSE Sensex

Shares of telecom services providers, on Thursday, were under pressure at the bourses with Bharti Airtel and Vodafone Idea hitting their respective over three-month lows on the BSE in intra-day trade.

Bharti Airtel slipped 5 per cent to Rs 499.35 in intra-day trade, falling 12 per cent in the past one month. In comparison, the S&P BSE Sensex fell 5 per cent during the period. The stock global telecommunications company's stock was trading at its lowest level since December 23. With today’s fall, the stock has now corrected 20 per cent from its record high level of Rs 623, hit on February 2, 2021.

Shares of Vodafone Idea (VIL) tanked 9 per cent to Rs 8.87, plunging 23 per cent in the past one month, amid heavy volumes. The stock was trading at its lowest level since November 14, 2020. The trading volumes on the counter jumped nearly three-fold with a combined 447 million equity shares changing hands on the NSE and BSE.

VIL’s board has approved funding raising of up to Rs 25,000 crore through a mix of debt. The company is in active discussion with potential investors and expects the fund raise soon. Similarly, on the tariff correction front, without indicating exact timeline, it has indicated that tariff hike (likely in near term) and/or floor tariff implementation will be key, analysts at ICICI Securities said in February report.

VIL remains the weakest private telco. While the Adjusted Gross Revenue (AGR) dues payment extension was a short-term breather, its survival hinges on quick capital infusion and tariff hike/floor tariff implementation. The need for capitalisation is of paramount importance mainly due to its lagging spends on network and relative market share loss, the brokerage firm said.

Meanwhile, Bharti Airtel informed the exchanges, on Wednesday, that the National Company Law Tribunal, New Delhi, Principal Bench (NCL') has sanctioned the Composite Scheme of arrangement between Bharti Airtel, Bharti Airtel Services (a subsidiary of Bharti Airtel), Hughes Communications India Private Limited and HCIL Comtel Private Limited (a subsidiary of Hughes) and their respective shareholders and creditors.

Bharti's subsidiary Airtel Africa, on Tuesday, announced the sale of 1,424 towers in Madagascar and Malawi to Helios Towers for $119 million. Airtel Africa's Tower portfolio in these two regions consists of 1,229 towers – it is entering into two separate agreements for the different jurisdictions. Total proceeds from the sale of these towers would be $108 million. The transactions expected to be completed in 4QCY21.

Additionally, it has entered into an exclusive MOU with Helios for the potential sale of its tower assets (around 1000) in Chad and Gabon. This deal should also incorporate lease agreements and the sites in these regions. This transaction is expected to be completed by end-FY22.

“Both of these decisions are in line with the management's intention to achieve strategic asset monetization. Proceeds from these transactions would be utilized for debt reduction and as investments in network and sales infrastructure,” Motilal Oswal Securities said in stock update.

Meanwhile, analysts at Axis Securities believe Bharti Airtel has a resilient business structure from a long term perspective EBITDA margins likely to expand in near term because of better execution.