New Delhi: Shares in leading Indian mobile carriers jumped on Monday after top mobile firm Bharti Airtel raised call tariffs in some of its telecoms zones, triggering expectations other firms will follow suit in a market that has one of the world’s cheapest call rates.
India’s 15-player mobile market is still the world’s fastest growing by subscriber additions, but stiff competition had led to sharp erosion in call prices in late 2009 and has strained mobile firms’ financials.
Call prices have stabilised since, but analysts said Bharti’s tariff increase could be an early sign of a revival in industry tariffs going forward, which would in turn boost operators’ earnings.
“...we see the tariff increase by the market leader Bharti as a fundamental change in the sector and it addresses our concerns on material pricing lift for the industry,” Religare analysts wrote in a research note.
Religare upgraded Bharti and smaller rival Idea Cellular to “buy” from “hold” and raised its outlook for the Indian telecoms sector to “overweight” from “neutral”.
Bharti shares rose as much as 3.2% to their highest level in about 3-1/2 months, while Idea Cellular jumped as much as 10.5 percent to Rs 94.40, its highest since July 2008.
Reliance Communications shares jumped as much as 6% to their highest level in about two weeks.
Idea was the most traded stock on the National Stock Exchange with about 7.3 million shares changing hands by 10:15am, more than double the stock’s 90-day average daily volume.
Bharti, which has reported a decline in quarterly net profit in the last five quarters, on Friday raised prepaid tariffs by 20 percent in six of India’s 22 telecoms zones, according to sources with knowledge of the matter.
The company said in a statement it had “little choice but to make some price corrections”, citing factors including continuously declining margins, high costs of radio airwaves it bought in an auction last year, but did not give details.
Companies including Bharti spent a total $24 billion in a state auction last year to buy radio airwaves for third-generation (3G) and broadband services, with most of it funded by debt.
Bharti also last year acquired mobile operations in 15 African countries from Kuwait’s Zain in a $9 billion deal that made it the world’s fifth-biggest mobile carrier by subscribers, but has so far weighed on its earnings.
“While the near-term impact on financials would be limited, we believe the hikes mark an earlier than-expected revival in wireless tariffs and are a long-term positive for earnings,” analysts at brokerage Anand Rathi wrote in a note.