Why are Telecom Stocks Rising?

Telecom stocks saw a significant rise in early trading on November 26 following the approval of bank guarantee (BG) waivers for telecom operators by the Union Cabinet. This move is expected to relieve the financial pressure on telecom companies.

Telecom Stocks React Positively

Vodafone Idea share price saw a significant surge of 16.64% on November 26, reaching ₹8.13 per share as of 10:35 AM. The stock opened at ₹7.66, reached a high of ₹8.28, and remained at a low of ₹7.66 during the session. Vodafone Idea’s market capitalisation stands at ₹56,600 crore. Over the past 52 weeks, the stock has ranged between a high of ₹19.18 and a low of ₹6.61. 

Mahanagar Telephone Nigam share price saw a notable gain of 6.39% on November 26, reaching ₹50.27 per share as of 10:35 AM. The stock opened at ₹50.00, hit a high of ₹51.45, and dipped to a low of ₹49.50 during the session. MTNL’s market capitalisation stands at ₹3,170 crore. Over the past 52 weeks, the stock has fluctuated between a high of ₹101.93 and a low of ₹27.45. 

Bharti Airtel share price saw a modest increase of 0.16% on November 26, with its stock trading at ₹1,581.25 per share as of 11:04 AM. The stock opened at ₹1,590.00, reached a high of ₹1,604.85, and had a low of ₹1,574.45 during the session.

Cabinet’s Key Decision

The Union Cabinet approved the waiver of bank guarantees for telecom operators on spectrum purchased before 2022. This is seen as a major relief, particularly for Vodafone Idea, which owes the government over ₹24,700 crore in bank guarantees. The move is also expected to ease the financial burden on other operators, including Airtel, which collectively have more than ₹30,000 crore in BG obligations.

Vodafone Idea, which has faced financial difficulties, has been calling for the BG waiver, arguing it would help improve cash flow and support greater investment in its network. The company recently struggled with missed BG payments, including ₹350 crore in November and ₹4,600 crore in September. To stay competitive with Airtel and Jio, Vodafone Idea is seeking loans and BGs worth ₹25,000 crore and ₹10,000 crore, respectively.

Financial Results and Challenges

In the fiscal second quarter ending September 30, Vodafone Idea reduced its consolidated loss to ₹7,176 crore from ₹8,737 crore in the same quarter last year. Revenue from operations rose to ₹10,932 crore, up from ₹10,716 crore. The company’s Average Revenue Per User (ARPU) increased by 7.8% to ₹166. However, its total subscribers dropped slightly to 205 million, with 4G subscribers at 125.9 million, compared to 126.7 million in Q1 FY25.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.