Shares of telecom companies soared on the bourses after they announced tariff hikes from this month. Even though the increase will pinch subscribers, brokerages feel it sets the stage for an improvement in the financial health of the telecom firms.
Bharti Airtel and Vodafone Idea had reported record losses for the September quarter as it provided for dues following a Supreme Court order in October. While Bharti Airtel suffered a loss of Rs 23,045 crore, Vodafone Idea had reported a consolidated loss of Rs 50,921.9 crore.
On Sunday, both these firms and Reliance Jio had announced that they will be charging more for calls and data. While the higher prices will be limited to pre-paid customers of Airtel and Vodafone Idea, it will be across-the-board for Jio. The hikes range from 20-50 per cent.
The Vodafone Idea scrip settled at Rs 7.79 apiece — a gain of 14.06 per cent on the BSE. During intra-day trade, the counter rose over 24 per cent to hit Rs 8.49.
Similarly, Bharti Airtel rose 3.67 per cent to close at Rs 458.55 on the BSE after rising 9.82 per cent in early trade to hit a 52-week high of Rs 485.75.
The decision of both these firms to raise prices received a boost when Reliance Jio said it would launch unlimited plans from December 6, which will raise its voice and data tariff by up to 40 per cent. This saw the Reliance Industries share finishing with gains of 2.28 per cent at Rs 1,586.30 on the BSE.
“The move on price hike marks a trend reversal. As Jio was at the forefront of aggressive pricing, the announcement of price hike is likely to set the stage for improvement in the financial health of telcos,” analysts at Axis Capital said in a note.