Bharti Airtel set a new high and Vodafone Idea extended its advance for the two straight sessions on Tuesday but today Airtel and Vodafone Idea Shares Fall, while Reliance Industries, which controls Jio, has been stabilising following a 17.5 per cent rally in the previous month.
According to a Business Standard story citing unidentified government insiders, the cause of the rise was a cabinet meeting slated for September 8 to debate an assistance package for financially troubled carriers.
“As part of the package, there could be some relaxation on payment of levies to the government, including a one-year moratorium on spectrum instalment due in April 2022,” the report said. “Telecom stocks are rallying for the past two days ahead of the cabinet meeting as there is an expectation of announcement of a relief package for the sector,” said Santosh Meena, head of research at Swastika Investmart.
“If there is an announcement related to that, then it will be a positive trigger for the entire telecom sector as well as for some banking stocks like IDFC First Bank, IndusInd Bank and State Bank of India.”
On September 8, Bharti Airtel set a new high of Rs 684 on the BSE, gaining roughly 30% in two months. At 13:20 hours, the stock was down 0.5 per cent at Rs 666.80.
In September, Vodafone Idea has risen 48 per cent on the back of optimism that the government will provide some respite. At 13:21 hours, the stock was up 0.24 per cent to Rs 8.30.
In a letter to shareholders, Vodafone Idea chairman Himanshu Kapania claimed that the operational environment remained challenging throughout FY21 due to “unsustainable pricing” and “hyper-competition,” which was exacerbated by the Covid-19 outbreak. “As the industry continues to remain under unsustainable financial duress, your company is hopeful that the government will provide the necessary support to address all structural issues faced by the sector,” he said in the letter.
He added that Vodafone Idea is hopeful that the government will support its attempts to earn decent returns on its large investments. ICRA, a rating agency, also stressed the importance of government help.
ICRA noted on September 6 that Vodafone Idea’s financial hardship, highlighted by escalating losses and rising debt, is expected to harm its financial lenders and have an impact on staff and subscribers and that government intervention is “critical” at this juncture.
The expected help however never came. The Cabinet meeting which took place today did not consider the proposals given by the telecom department.
The Department of Telecommunications (DoT) had put forward the option for a four-year moratorium on adjusted gross revenue (AGR) and spectrum payments.
In addition to this, they had also proposed a reduction in spectrum usage charge (SUC) and redefining AGR to exclude ‘non-telecom items.
The introduction of these measures would have improved the health of the sector which has debts above Rs 8 lakh crore preventing it from turning into an oligopoly.
The Cabinet however did not consider providing the telecom departments proposals for the sector.
The shares of Vodafone Idea shares fall 1.82% today ended at Rs. 8.10. The rise of the shares of Bharti Airtel also came to an end as it ended the day at Rs. 668 down 0.38%.
