Bharti Airtel, Vodafone Idea: A relief rally

Bharti Airtel, Vodafone Idea: A relief rally

Telecom major Bharti Airtel share price shot up around 5% in two days while Vodafone Idea shares have skyrocketed around 40% in the last 5 trade sessions over the buzz of some relief in AGR (adjusted gross revenue) dues payment.
If the relief package for the sector is announced, then it will be a big positive trigger for the entire telecom sector.
The Union Cabinet is likely to discuss a relief package for the financially stressed telecom sector on Wednesday.
The government has held several rounds of discussions on encouraging telecom companies to monetize their assets via InvIT and REIT instruments.

The Cabinet meeting is likely to take up some other proposals including those related to textile PLI (production-linked incentive) scheme and minimum support price of rabi crop.
The DoT has allowed to treat tower assets as real estate or infrastructure, hence the companies can tap these routes (InvIT and REIT) to raise funds. The letter of comfort will act as an assurance for investors of cash-starved Vodafone Idea which was unable to raise adequate funds.

The move, if approved, would apply to all telecom firms but would benefit Vodafone Idea immediately.
Further, the Government of India has recently granted permission to manufacture telecom hardware equipment like optic fiber cable, router, modem, etc. making it easier for made in India 5G roll out. This has triggered upside in telecom hardware stocks like Tejas Networks, Sterlite Tech, etc. Apart from this, market is of the opinion that relief in AGR dues will be a big boost for telecom companies, especially for Vodafone Idea. Some relief in AGR dues payment is strongly anticipated.
Meanwhile, Bharti Airtel has already announced to increase tariff and achieve Rs 200 ARPU from existing around Rs 145 ARPU (Average Revenue Per User).

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