Possibility of Tariff Hike Boosting Vodafone Stock Today

  • 10 months ago
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By Puneet Sikka

Investing.com — Telecom stocks were in news yesterday after the Supreme Court allowed the mobile carriers to settle the AGR dues in 10 years. Although it was a much-needed reprieve for Vodafone (LON:) Idea Ltd (NS:) and Bharti Airtel Ltd. (NS:), the court also asked the telecom firms to pay 10% of the dues to the government by March 31, 2021. Reliance Industries Ltd (NS:) Jio, India’s third major telecom provider, has already settled all of its relatively smaller dues.

Vodafone’s ongoing financial struggles mean that arranging $3-4 billion in such a short time frame (before March 2021) may be difficult. Vodafone’s stock tanked by 13% yesterday, however, today the stock is up by 6% despite trading with a negative bias. Bharti Airtel, on the other hand, jumped by 6% yesterday as it is in a much better financial state than Vodafone, and 10 years give it sufficient time to repay the dues.

The rumor that is fueling Vodafone’s jump today is the possibility of a tariff hike that these telcos will have to undertake pretty soon. Interestingly, this will be the second hike conducted by the telcos after they had raised the tariffs by upto 40% in December last year.

Vodafone will also have to conduct other conventional ways to raise funds before March 31, 2021. Vodafone might have to raise funding through methods ranging from assets sale, rights issue, and/or a fresh round of equity financing by the promoters.

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