Telecom stocks surged 7-11% on a day markets ended flat after India’s largest operator by subscriber base, Bharti Airtel, reported improvement in key performance indicators average revenue per user (Arpu) and total usage of minutes.
Bharti Airtel share posted its biggest gain in three years at 7.3% to close at R344.90 on the BSE. While the telecom major reported 9.6% y-o-y fall in net profit at R688.9 crore in the quarter ended June, it reported an Ebitda margin of 32.3% with consolidated Ebitda at R6,545 crore. Arpu rose 4% q-o-q to R200/month, while total minutes used grew 2% q-o-q.
Other telecom players also gained from Bharti’s Q1 performance. Reliance Communications surged more than 10% to close at R139.60, while Idea Cellular touched a 52-week-high of R170.75 before closing at R169 or 7.8% higher from the previous day’s close. RCom and Idea Cellular will announce their results on Thursday.
Like Bharti, other telecom players could see improvement in their key metrics, said analysts. “The sector is favourably positioned as tarriff pressures have eased,” said Daryl Philip, senior research analyst, Finquest Securities. “The industry has also got used to the regulatory concerns.”
Year-to-date, Bharti Airtel has gained 8.9%, while Reliance Communications and Idea Cellular have gained 89% and 63%, respectively.
According to market observers, the results may imply that the worst is over for the sector. “Telecom companies were underperforming for the last 2-3 years. Bharti’s Ebit margin has improved to 13.3% after reporting 10-11% Ebit margin in previous six quarters. Things are looking upbeat for the sector going ahead and investors don’t want to miss out on telecom stocks,” said AK Prabhakar, senior VP — equity research, Anand Rathi Financial Services.