Bharti Airtel, Idea Cellular in focus on tariff hike buzz

Telecom stocks – Bharti Airtel, Idea Cellular and Reliance Communications (RCom) – are trading higher by as much as 3% on reports that mobile tariffs could rise between 8–9% going ahead.

In an interview with Economic Times, Telecom Regulatory Authority of India (Trai) chairman, Rahul Khullar has suggested that he sees mobile call rates rising by 8-9% over the year as phone companies weed out freebies.

He also said in the interview that the government should hasten the opening up of spectrum for high-speed access and that the new M&A norms were too stringent and would inhibit much-needed consolidation in telecom.

Most telecom stocks have outperformed the market on Friday with Bharti Airtel trading 2.8% higher at Rs 382 levels and RCom surging 1.6% to Rs 137 levels. Idea Cellular is also trading 2.5% higher at 161 levels.

Bharti Airtel (Bharti)'s consolidated performance in the recently concluded was marked by a strong improvement in the domestic mobile business which led to a top line growth of 3.3% QoQ (the top line growth was a result of volume as well as price led improvement).

The operating profit grew by a strong 5.7% QoQ. Consequently, the margin expanded by 73BPS QoQ to 33.6%. The strong operational performance coupled with a lower interest cost resulted in a 15.3% sequential growth in the earnings. Adjusting for the exceptional loss for both the quarters, the adjusted earnings grew by 17.1% QoQ.

Analysts at ICICI Securities have revised their target price for to Rs400 (earlier: Rs355) and maintain ADD rating on Bharti Airtel.