The Supreme Court ruling last week to grant a stay of telecom operators boosted the morale of investors in Vodafone Idea Ltd and Bharti Infratel Ltd. While Vodafone Idea shares have since risen 40%, Infratel’s have jumped 20%. The latter’s market capitalization increased by more than ₹Around 7,000 crore ₹42,700 crore.
The odds of India continuing to be a three-player market for telecom operators have increased, which is a relief for the tower infrastructure company.
Vodafone Idea’s board of directors approved a crucial fundraising plan last week, although it is essential that a strategic investor with deep pockets be hired soon. On Monday, the company also announced the completion of the merger of Vodafone India and Idea Cellular and launched a new unified brand: Vi.
These announcements obviously reassured investors, with Infratel’s share continuing its uptrend on Monday. Vodafone Idea is a large client of Infratel.
“This suggests that they won’t be going out of business anytime soon. They play their second round brilliantly. This means three-player telecoms are continuing, ”an analyst said on condition of anonymity.
Similar to Airtel, Vodafone Idea also argues for tariff increases, calling them less sustainable than costs. While it is still unclear when the rate hikes will fall into place, analysts expect action on the front lines quickly as it is the only way the company can survive in the medium term. In addition, it will help the company to maintain its investments in its network. Voda Idea has been lagging behind in 4G capex, which has led to severe market share losses. “Hinting at rate increases, the CEO of Voda Idea said the company was ready to take the first step in raising rates. This is an essential requirement for a company with a net debt of ₹1.7 trillion (including AGR commitments) to meet its annual treasury obligations, ”said an analyst from another brokerage firm.
While a lot needs to be put in place for Vodafone Idea to survive, investors are betting that it has started in earnest and that the aforementioned measures can also support the recovery at Bharti Infratel.
The total number of co-locations or rentals on telecommunications towers improved over the past fiscal year after falling for two years. Net additions of rounds in FY20 were also higher than in the previous year. Growing data consumption and the need for better networks after covid-19 ensure a long-term demand for telecommunications tower services.
That said, it all depends on how the growth of Voda Idea unfolds. It must not only maintain its current scale of operations, but also have growth prospects to provide significant opportunities for service providers.
“Reducing Vodafone Idea’s operations in the weakest circles is a risk. He also runs the risk of renegotiating rents as rentals come out of the lock-in in FY22. Industry tariff increases and / or stock injection into Vodafone Idea are potential triggers, ”Dolat Capital Market analysts said in a note.