Reliance Jio and Bharti Airtel will continue to grow in a comfortable and low competition environment in the Indian telecom sector, said BofA in its latest note. For Jio and Airtel, BofA has alloted a Buy rating because of potential upsides in the near future. As for the third-operator, Vodafone Idea (Vi), there's an Underperform rating, because of debt and continous market share loss. The stock could bounce back, like it did on Thursday morning, due to relief from the government or the Supreme Court (SC) on the AGR (adjusted gross revenue) dues matter.
Read More - Vodafone Idea Shares Up Almost 10% Ahead of Final AGR Ruling
The issue with Vodafone Idea is that the fundamentals appear to be weak. The core of the business, wireless is seeing a decline in market share for several years now. While plenty of capex (capital expenditure) has been made by Vi for improving the 4G networks and introducing 5G in new regions, the telco has not seen any material gain in business.
In the coming future, BofA Securities expects that there will be around two more industry wide tariff hikes. However, no timeline was given for the same. At TelecomTalk, we expect that the tariff hikes will go along the same trend as before, once every two years for industry-wide and some continous optimisations of plans in shorter-intervals.
Read More - Vodafone Idea Rs 4999 Prepaid Plan: What it Brings
This will help the telcos in reaching and crossing the Rs 300 ARPU (average revenue per user) mark. For Airtel, one more round of tariff hikes wherein the plans price goes up by around 10-15% will result in an ARPU of about Rs 300, which is its target. After that, it will be interesting to see what will the telco do to raise prices further. There are already talks about a different pricing structure, if that will be implemented any time soon or not is something we will have to wait and see.
