Telecom stocks surge after bharti airtel hikes tariffs
Telecom stocks on Monday rose by up to 16% in anticipation of a softening of price war among operators after Bharti Airtel on Friday raised pre-paid call rates by over 20% in Delhi, Gujarat, Madhya Pradesh, Andhra Pradesh and Kerala.india Updated: Jul 25, 2011 21:17 IST
Telecom stocks on Monday rose by up to 16% in anticipation of a softening of price war among operators after Bharti Airtel on Friday raised pre-paid call rates by over 20% in Delhi, Gujarat, Madhya Pradesh, Andhra Pradesh and Kerala.
Bharti Airtel saw its share price jump by 5.4% to close at a 22-month high of Rs 433. Shares of Reliance Communications rose by up to 16% in early trade before ending the day with a gain of 14.9% at Rs 107.5. Idea Cellular and MTNL also saw their share prices jump by over 10% intra-day before settling the day with gains of 8% and 9.3% respectively.
According to experts, the tariff hike is positive and will gradually improve operators’ average revenue per user (ARPU) but it needs to be seen as to how competitors react.
“The move shows that the competitive intensity in the industry is easing out,” said Gaurav Dua, research head, Sharekhan. “It is now important to see how competitors react to this and how Bharti subscribers react to this in the respective circles.”
However, while others may follow suit, Bharti Airtel’s move was a carefully calculated one, said experts. The circles account for more than a quarter of Bharti’s 176 million subscribers in India.
“Bharti could witness higher churn if other operators come with a lag,” said a research report by Emkay Global Financial Services. Bharti’s decision to take the price increase across all circles will therefore depend on competitors and subscribers’ reactions.