Telecom stocks gain as govt waives bank guarantee; Vodafone Idea surges 16%

Vodafone Idea is expected to be one of the key beneficiaries as the company was required to submit a total of Rs 24,700 crore in BGs, ICICI Securities said in a note.

Shares of telecommunication companies were in focus and rallied up to 16 per cent on the BSE in Tuesday’s intra-day trade following reports that the Union Cabinet has approved a waiver of bank guarantees (BGs) for telecom companies, marking a significant step toward easing the financial burden on the sector. The waiver applies to spectrum acquired by telecom operators in auctions held before 2022.

 

Shares of Vodafone Idea (VIL) surged 16 per cent to Rs 8.13 on back of heavy volumes as the company was expected to be one of the key beneficiaries. Till 09:52 am; a combined nearly 608 million shares changed hands on the NSE and BSE. The stock of telecom services provider hit a 52-week low of Rs 6.60 on November 22, 2024. It touched a 52-week high of Rs 19.15 on June 28, 2024.

 

 

VIL is expected to be one of the key beneficiaries. VIL was required to submit a total of Rs 24,700 crore in BGs, ICICI Securities said in a note.

 

VIL expects another tariff hike of 15–20 per cent in 15 months, which will help the company grow revenue, EBITDA and FCF. The company also has strong gross subs add while net adds have been negative due to elevated churn. It believes 4G rollout should help the company improve customer retention, resulting in growing subs base, the brokerage firm said in recent report.

 

The company’s capex plan remains firm at Rs 50,000–55,000 crore over the next three years, and it has signed radio suppliers Nokia, Ericsson and Samsung for a total requirement of Rs 30,000 crore. Remainder capex includes investment in core, and  ransmission (fiber). VIL’s plan suggests that it will likely see higher spend on 5G in the next three years compared to 4G.

 

VIL expected Rs 8,000 crore capex for H2FY25. The debt from banks and financial institutions reduced by Rs 4,580 crore during the last one year (was at Rs 7,830 crore in Q2FY24) and stood at Rs 3,250 crore. The company’s management while announcing Q2FY25 results on November 13, said that the payment obligations to the Government stood at Rs 2,122.6 billion as of September 30, 2024 including deferred spectrum payment obligations of Rs 1,419.4 billion and AGR liability of Rs 703.2 billion.

 

Besides, VIL, shares of Bharti Airtel, Indus Tower, Bharti Hexacom and Reliance Industries from the BSE Telecommunication index have rallied by up to 5 per cent in intra-day trade. The BSE Telecom index, the top gainer among sectoral indices, was up 1.8 per cent, as compared to 0.3 per cent rise in the BSE Sensex.