Bharti Airtel surges 5%, hits new high after SC rejects telcos' plea

The stock bounced back 6 per cent from its intra-day low of Rs 535 on the BSE

Shares of Bharti Airtel jumped 5 per cent to a fresh lifetime high of Rs 565 on the BSE on Friday as investors bet on a potential duopoly in the Indian telephony market after the Supreme Court today rejected the telcos' review plea on adjusted gross revenues (AGR) payments.

In a major setback for the telecom companies, the Supreme Court rejected the plea seeking new schedule of AGR payments. Coming down heavily on the Department of Telecommunications (DoT) for not taking coercive action against telcos for failing to repay, the apex court ordered contempt proceedings against Bharti Airtel and Vodafone Idea. CLICK HERE TO READ THE FULL REPORT

The stock of the telecom services provider bounced back 6 per cent from its intra-day low of Rs 535 on the BSE. It surpassed its previous high of Rs 552.85, touched February 6, 2020.

Airtel raised the due amount from equity investors, thanks to its higher m-cap, but its competitor, Vodafone Idea, is struggling to gather funds to pay its tax liability. This increases the prospects of a two-operator duopoly in India’s telecom sector. This would push up tariffs and margins in the industry, greatly benefitting Airtel, analysts said.

While announcing the December 2019 quarter results on February 4, Bharti Airtel had said that pursuant to the infusion of fresh equity and long-term financing via convertible bonds, and available liquidity/facilities with the Group, the management concluded that the previously reported material uncertainty on the Group’s ability to continue as a going concern no longer exists.

The telecom operator posted a strong operational performance for the quarter ended December 31, 2019 (Q3FY20), lifted by an improvement in average revenue per user (ARPU). The company’s consolidated revenues increased by 8.5 per cent year on year to Rs 21,947 crore in Q3FY20, as compared to Rs 20,231 crore in the year-ago period. On the operational front, the company posted an improvement in ARPU from Rs 128 to Rs 135, sequentially.

“Airtel continues to report a relatively stronger retention of its revenue market share with stable key performance indicators across, and also enjoys a comfortable leverage vis-à-vis peers. We note that while the AGR issue is sub judice and the management refrained from commenting on it, Airtel’s survival is assured post fund raising and tariff hike. With the resilient performance amid challenging times, Airtel is one of the better placed telecom players,” analysts at ICICI Securities said in result update.