16 Sept 2021
Shares of India's Vodafone Idea, Surged Nearly 20%
The Index Today
Shares of Vodafone Idea Ltd surged nearly 20% and banks with exposure to the telecom firm jumped on Thursday, a day after India's federal cabinet approved a relief package for the troubled sector.
A four-year moratorium on airwaves payments due to the government and raising the tenure of airwaves held by firms were a part of the package, along with a change in the contentious definition of adjusted gross revenue (AGR) to exclude non-telecom income.
Analysts said that the measures could restore the idea of a three-player telecom market for the time being, but it does not provide a long-term solution.
Pranav Kshatriya, vice president of institutional equities at Edelweiss Securities, said that "For long-term sustainability, Vodafone Idea will require not only capital infusion, but a sizeable tariff hike for 4G pre-paid customers. In the absence of this, the industry can slip towards a duopoly."
Troubles for the telecom sector, which had already been disrupted by the entry of billionaire Mukesh Ambani's Reliance Jio and forced some rivals out of the market, had been compounded with the huge dues to be paid to the government.
In addition to the reports, Vodafone Idea, a combination of the India unit of Britain's Vodafone Group and domestic telecoms firm Idea Cellular, alone still owes the government about 500 billion rupees ($6.81 billion).
Shares of the company climbed 20% to their highest since June 29, while rival Bharti Airtel rose up to 1.4% before shedding early gains.