Big Relief Measure For Telcos Saw Profit Booking In The Market

New Delhi, November 21: The government’s announcement on Wednesday regarding deferred payments on allocated spectrum to telecom companies witnessed profit booking in the market as it failed to enthuse investor sentiments after a three-day rally.

On Thursday, shares of Bharti Airtel and Vodafone Idea were in the red,  down 2-4 per cent after the government said it would allow telecom service providers to defer payment of spectrum auction instalments due for 2020-21 and 2021-22. This move is expected to give immediate relief of more than Rs 42,000 crore to mobile phone companies. 

Bharti Airtel’s share, however, closed at Rs 426.85, down 2.39 per cent, while Vodafone Idea was down 5.67 per cent and closed at Rs 6.65 at NSE.

However, Vodafone Idea and Bharti Airtel have rallied up to 150 per cent in the past four days after Finance Minister Nirmala Sitharaman said the government didn’t want any telecom company to shut operations. The government on Thursday allowed Vodafone Idea, Bharti Airtel and Reliance Jio to make the next spectrum payment to the government only in fiscal 2022-23

While telecom stocks did not perform well after the cabinet announcement, they rallied substantially ahead of the announcement.  As Vodafone Idea climbed 35 per cent in Tuesday’s trade taking its three-day gain to 100 per cent, on the other hand, Bharti Airtel closed 7.36 per cent higher to Rs 439.25 in trade, taking its three-day gains to nearly 19 per cent.

That rise could have been due to multiple factors including telecom companies decision to raise tariffs, anticipation of government’s intervention during the scheduled cabinet meet and also due to Sitharaman’s statement on Monday.

After announced plans to raise tariffs, the shares of telecom operators like Bharti Airtel Ltd, Vodafone Idea Ltd and Reliance Jio Infocomm rose exponentially.

In the September quarter, Vodafone Idea paid license fee and spectrum usage charges of Rs 1,114 crore constituting as much as 37 per cent of the operating loss--earnings before interest and tax--for the period. 

For Bharti Airtel, the license fee, revenue share, and spectrum charges for its India business as a whole amounted to Rs 1,325 crore while operating losses at its mobile services business were Rs 1,144 crore last quarter.

Airtel, Vodafone and Reliance Communications (RCom) recently reported a cumulative loss of over Rs 1 lakh crore for the quarter ended September 30.

RComm posted a loss of Rs 30,142 crore due to provisioning of liabilities after the recent Supreme Court ruling on statutory dues. Likewise, Vodafone Idea and Bharti Airtel also posted record losses of Rs 50,921 crore and Rs 23,045 crore, respectively.