Telecom shares in focus; Vodafone Idea up 12%, Bharti Airtel gains 3%

As per media reports, Vodafone Idea is considering increasing tariffs 15-20% by the end of the year or early next year

Shares of telecom service providers were in focus at the bourses on Tuesday amid hopes of tariff hike in the forthcoming months. Among individual stocks, Vodafone Idea (Vi) rallied 12 per cent to Rs 10.20 in the early morning deal after media report suggested that Vi is considering increasing tariffs 15-20 per cent by the end of the year or early next year. 

This is on the expected lines as the company is struggling with cash burn and aiming fund raise, according to analysts.

At 09:44 am, the stock was trading 7 per cent higher at Rs 9.74, as compared to 0.64 per cent rise in the S&P BSE Sensex. Trading volumes on the counter nearly doubled with a combined 370 million equity shares changing hands on the NSE and BSE till the time of writing of this report.

Shares of Bharti Airtel, on the other hand, were up 3 per cent to Rs 495, its highest level since September 21, 2020. With today's gain the stock has surged 26 per cent from its low of Rs 394 hit in October.

In the past three months, the stocks of Vodafone Idea (up 8 per cent) and Bharti Airtel (down 6 per cent) have underperformed the S&P BSE Sensex, which gained 15.5 per cent during the same period.

Analysts at ICICI Securities believe higher 4G subscribers base will enable Bharti to better transfer tariff hike into average revenue per user (ARPU) whenever it happens.

"Bharti's India mobile print shows marked improvement in many areas such as growth in total subs without ARPU dilution which shows quality of customer addition; lower churn rate increasing life-time value of customers and continued delivery of 4G net add, which has now likely matched the market leader. Our estimates for FY21 had downside risk on delay in tariff hike. However, robust Q2FY21 performance has offset much of it," the brokerage firm said in result update with 'BUY' rating on the stock and target price of Rs 655.