ADAG company announced 25 bps hike on Friday

Stocks of telecom companies surged on the bourses after Reliance Communications announced a hike in base tariffs on Friday. The surge was on the back of speculation that major telecom players would raise base tariffs in the coming days.

Reliance Communications stock closed at Rs 62.05, up 7.82 on the BSE. RCom increased the base tariff by 25 per cent to 1.5 paisa a second from 1.2 paisa a second as “competitive intensity tapers off and input costs rise.”

“The new tariff will be applicable across the country in next 30 days. The move will help improve top line revenue and operative margins per user,” said an RCom spokesperson.

Bharti Airtel stock closed at Rs 279.10, up 4.01 per cent. Idea Cellular closed at Rs 88, up 0.11 per cent. However MTNL fell by 3.06 per cent.

Evaluating plans

“There is news that other telecom operators are evaluating plans to increase tariffs. As of now, the tariffs have been increased in only four circles. However, I don’t think this will contribute substantially to their revenues,” said Ankita Somani, Telecom Analyst, Angel Broking.

Analysts said the surge in the stocks was complimented by the positive market movements on Friday. The Nifty ended the day at 5,691, up 137 points and the Sensex closed at 18,753, up 403 points.

Recently, Bharti Airtel, Vodafone and Idea Cellular — witnessed a decline in subscribers for the first time in August, according to Cellular Operators’ Association of India data.

“The fall in subscriber numbers reflects saturation in many circles and in our view will make it challenging for telecom companies to drive revenue growth going forward, given that data revenue has not taken off in a big way to compensate for the slowdown in voice revenue growth.

“The competitive environment also remains challenging and any tariff hikes such as the one made recently by Idea in Madhya Pradesh are unlikely to come without an attendant impact on usage,” said a report from Nirmal Bang, which has a ‘negative’ outlook on the telecom sector.

(This article was published on September 21, 2012)
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