Shares of telecom services provider Bharti Airtel were in great demand on Wednesday, with the stock rising 4.5 percent on the BSE in intraday trade. Vodafone Idea (VIL) shares also reached a 52-week high of Rs 18.47, up 7% on heavy activity. The stock beat its previous high of Rs 18.42, set on January 1.
Reliance Industries (RIL) rose over 4% to Rs 3,015 in intraday session. The stock of the country's most valuable corporation in terms of market capitalization was trading near its record high of Rs 3,029.90 set on June 3. Jio Platforms operates Reliance Jio, India's largest mobile network operator.
Vodafone Idea Limited
In comparison, the BSE Sensex was up 0.81 percent at 78,682 at 02:51 p.m. According to a PTI report, an auction of radio waves that transmit voice and data signals for mobile phones finished in two days on Wednesday, with less than 12% of the Rs 96,238 crore minimum value projected by the government for the spectrum on sale.
Analysts at BNP Paribas stated in its May 2024 telecom research that they expected the industry growth rate to accelerate in the following quarters, driven by tariff hikes, which, along with a slowdown in customer turnover, should bode well for margins in FY25. Furthermore, the brokerage firm anticipates capex to drop, resulting in higher Free Cash Flow (FCF) creation. Meanwhile, VIL's stock price has risen over the last eight trading days after the company's management stated that VIL is fully prepared to participate in industry growth by making the necessary investments to expand its 4G coverage and provide customers with a 5G experience while remaining focused on its execution capabilities.
"As VIL embarks on its growth journey, support from key stakeholders is critical and the agreement with Nokia and Ericsson reaffirms these vendors as long-term partners of the Company, and sets the stage for the next phase of our growth," the board of directors commented. VIL raised about Rs 24,000 crore in equity, comprising the conversion of 1,440 Optionally Convertible Debentures (OCDs) by ATC India in March 2024 (out of 1,600 OCDs issued), a follow-on public offer (FPO) in April 2024, and a preferential issue to promoters in May 2024.
UBS, a global brokerage firm, estimates the market is pricing in a 15-20% increase in mobile prices over the next 12-24 months for Vi. According to the international brokerage, the Supreme Court will likely provide relief in the form of adjusted gross revenue (AGR) reductions or equity conversion moratoriums, particularly given the government's declared goal of ensuring three viable private telecoms.
The telecom business has consolidated in recent years in favor of the top two operators, while VIL has been unable to invest in network infrastructure. However, VIL's recent financing is likely to help balance the industry.
According to analysts at BNP Paribas, this may hinder Airtel and JIO's market share gains. They anticipate the three operators to prioritize improving their return on capital by boosting tariffs. Even when VIL begins network investments, the brokerage business feels that the period of tariff competitiveness is over.
