This Article is From Dec 02, 2019

Telecom Stocks Zoom As Companies Hike Tariffs: 10 Points

Telecom stocks are in the limelight this morning after hiking the prepaid tariff rates by up to 40 per cent for pre-paid customers.

Telecom Stocks Zoom As Companies Hike Tariffs: 10 Points

Vodafone Idea and Bharti Airtel will hike the tariffs from December 3, and Reliance Jio, from December 6


  • Bharti Airtel, Vodafone Idea, Reliance Jio have announced higher tariffs
  • Airtel shares jump nearly 10%, Vodafone Idea stock soars 24%
  • Higher tariffs to ease pressure on telecom balance sheets: analysts
Telecom stocks jumped on Monday after three of India's telecom giants - Bharti Airtel, Vodafone Idea and Reliance Jio - announced higher tariffs from this month. Bharti Airtel and Vodafone Idea shares soared as much as 4.1 per cent and 14 per cent respectively, whereas shares in Reliance Industries - the parent company of Reliance Jio Infocomm - rose 2.2 per cent at the strongest level in the morning. Analysts say the higher mobile tariffs will ease some of the pressure on the telecom service providers' balance sheets.

Here are 10 things to know:

  1. Vodafone Idea and Bharti Airtel have decided to increase the tariffs with effect from December 3, while Reliance Jio will implement the hike from December 6.

  2. The three telecom companies together account for more than 90 per cent of the country's 118 crore mobile subscribers.

  3. Vodafone Idea and Bharti Airtel have announced new prepaid plans priced from Rs 19 to Rs 2,399, offering a validity period ranging from two days to 365 days.

  4. Reliance Jio has not outlined its plans as yet, but said that its tariffs will be 40 per cent higher and bundled with 300 per cent more benefits to the customers.

  5. The hike in tariff come in the backdrop of record losses reported by both Bharti Airtel and Vodafone for the quarter ended September 30 due to huge provisions towards dues owed to the telecom department for adjusted gross revenue (AGR). 

  6. A Supreme Court ruling on the adjusted gross revenue (AGR) in October came as a huge setback for telecom companies, as it allowed the telecom department to recover dues worth Rs 1.33 lakh crore from them. 

  7. The top court rejected the telecom companies' appeal against the government's definition of AGR.

  8. The DoT and the mobile carriers have been at odds over the definition of AGR. The companies argue that AGR should comprise just revenue accrued from core services, while the DoT says AGR should include all revenue.

  9. Telecom providers in the country pay the telecom department nearly 3-5 per cent of their adjusted gross revenue in usage charges for spectrum or airwaves and 8 per cent of AGR as licence fees.

  10. Additionally, Vodafone Idea and Bharti Airtel have an outstanding debt of more than Rs 1 lakh crore each. According to government data, the liabilities of Bharti Airtel add up to nearly Rs 35,586 crore, of which Rs 21,682 crore is licence fee.