Airtel, Jio tariff hikes: Is the telecom sector ripe for rerating? Experts weigh in
Reliance Industries and Bharti Airtel hit their fresh all-time highs in intraday trade on Friday, 28 June, indicating investors' positive reaction to the tariff hike reports.Industry experts anticipated tariff hikes following the Lok Sabha elections due to declining revenue and margins in the sector. Companies require capital to invest in spectrum and cutting-edge technologies.Experts believe the tariff hikes are a positive step and will augur well for stock prices.
The sector could be ripe for re-rating."The Indian telecom sector is ripe for a re-rating due to a unique combination of factors. With just three major players—Bharti Airtel, Reliance Jio, and Vodafone Idea—controlling the major market, even minor re-ratings in ARPU can significantly impact their stock prices," said Trivesh D, Tradejini."Looking ahead, successful spectrum bidding, implementation of tariff hikes, and continued subscriber base growth can all be catalysts for a rerating.
As the sector consolidates and becomes more efficient, the market will likely recognise this through a re-rating, potentially leading to higher valuations and better returns for investors," said Trivesh.With elections over and spectrum auctions over, telecom companies have hiked tariffs by 20-25 per cent.After Reliance Jio raised the prices of its existing monthly and annual plans, Bharti Airtel decided to increase mobile tariffs by 10 per cent to 21 per cent. The revised tariffs of both the companies will be effective from July 3.Prashanth Tapse, Senior VP Research Analyst at Mehta Equities, pointed out that the industry was waiting for elections and decided to raise tariffs in the range of nearly 10-25 per cent, which is the need of the hour for all telecom players to sustain
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