Shares of telecom firms Bharti Airtel, Vodafone Idea snapped their 4-day winning streak after the government provided relief to the sector in terms of a two-year moratorium on spectrum-related dues.
Shares of telecom firms Bharti Airtel, Vodafone Idea snapped their 4-day winning streak after the government provided relief to the sector in terms of a two-year moratorium on spectrum-related dues. Bharti Airtel share price ended 2.5% lower at Rs 426.25 on BSE. Vodafone Idea shares closed 6% down at Rs 6.64 on BSE. The Union Cabinet on Wednesday decided to defer thousands of crores of rupees in dues from the telecom companies towards spectrum payments, freeing up some cash for the firms reeling under immense financial stress. The spectrum payment installment dues have been decided to be deferred from the year 2020 to 2022, without any increase in the charges, Finance Minister Nirmala Sitharaman announced.
Interestingly, the shares fell despite government’s mega relief of more than Rs 42,000 crore to the sector. According to Dipan Mehta, Director, Elixir Equities, the market is selling on news and buying on rumours. “There is too much froth in trading positions in telecom, but at some point it will settle down. One needs to now look at telecom more seriously. Many portfolios do not have telecom as part of their core holdings and that may change going forward,” Mehta told in an interview to ET Now. Notably, while Bharti Airtel has moved up by more than 16% in the last 4 session, Vodafone Idea shares have returned more than 150 per cent.
According to the expert, the worst is over for the telecom space. “I do not know if Vodafone will really turn out to be a winner, but at least Bharti Airtel can survive the AGR issue and can go from strength to strength. But from an investment perspective the stock has already moved up and I would like to buy it at a correction,” he told the channel.
Last week, Vodafone Idea and Bharti Airtel reported a combined loss of nearly Rs 75,000 crore for the second quarter ended September 30, 2019 results after the Supreme Court asked telecom companies to pay Rs 92,000 crore to the government as Adjusted Gross Revenue (AGR). Bharti Airtel posted its biggest consolidated net loss at Rs 23,045 crore for the September quarter on the back of provisions for the licence fee and spectrum usage charge based on the definition of the Supreme Court of what constitutes adjusted gross revenue. This the second consecutive loss after 14 years. The company made an exceptional charge during the quarter of Rs. 22,394 crore (net of tax) which comprises a charge on account of licence fee and SUC of Rs. 16,815 crore and Rs. 11,635 crore, respectively.