Vodafone Idea surges 14% on heavy volumes, stock at 9-month high

In past six trading days, the stock of telecom services provider has rallied 24 per cent after the company had increased its prepaid tariff by 20-25 per cent from November 25, 2021.

Shares of Vodafone Idea hit a fresh nine-month high of Rs 12.39, surging 14 per cent on the BSE in Monday’s intra-day trade on back of heavy volumes. In the past six trading days, the stock of telecom services provider has rallied 24 per cent after the company increased its prepaid tariff by 20-25 per cent from November 25, 2021.

The stock was trading at its highest level since February 12, 2021. It had hit a 52-week high of Rs 13.80 on January 15, 2021. At 9:48 am, Vodafone Idea had pared some of its gains and was up 6 per cent at Rs 11.54 on the BSE. In comparison, the S&P BSE Sensex was up 0.12 per cent at 57,177. The counter has seen huge trading volumes with a combined 498 million equity shares changing hands on the counter on the NSE and BSE.

On November 23, Vodafone Idea hiked its prepaid tariff plans by 20-22 per cent across the board and 25 per cent in base entry level voice (2G plan), similar to Airtel. The company said the new plans will start the process of average revenue per unit (ARPU) improvement and help address the financial stress faced by the industry.

The tariff hike, which comes two months after the telecommunications (telecom) reforms, is a step towards improving financial stability of the sector. In the case of Vodafone Idea, this could also help to boost investor sentiment and raise funds. The company hopes to complete fund-raising by the end of this financial year.

ICICI Securities expect the tariff flow through to raise the EBITDA runrate by around 30 per cent. However, since we had taken 15 per cent hike in our estimates, EBITDA upgrade for FY23 will be ~6-7 per cent. Key will be fund raise and improved network spends for the company, going forward, the brokerage firm had said in a note.

“The recent government relief package, followed by the tariff hike of 20 per cent, may improve cash flows and attract capital. But the significant amount of cash required to service its debt, leaves limited upside opportunity for equity holders, despite the high operating leverage opportunity from improved ARPU. The current low EBITDA would make it challenging to service its debt without an external fund infusion, Motilal Oswal Financial Services had said.

Meanwhile, on Vodafone Idea on Friday said it has achieved around 4 gigabit per second speed during the ongoing 5G trials. The speed was achieved in the 26 gigahertz spectrum band, or the millimeter band, which is proposed to be put for sale in the future auction, the PTI reported.