The stock price of telecom giant Vodafone Idea fell to a new 52-week low on Monday after brokerage Kotak Institutional Equities said that price hikes and making money from 5G might be put off until after the general elections in 2024. If that is the case, the delay in the price hike could hurt Vodafone’s Idea the most.
Vodafone Idea’s stock closed at 6.04 per share on the BSE, which is a drop of 3.67%. The stock hit a new 52-week low of 6 each during the day. From its 52-week high of 11.55 per share on BSE, Vodafone Idea is now down by more than 91%.
Last week, on Friday, Vodafone Idea stock stood at ₹6.27 apiece.
Analysts at Kotak said in a March 27 research note that Reliance Jio’s renewed aggressiveness in postpaid and Bharti Airtel’s decision to match R-unlimited Jio’s data offer on 5G raises the competition to get premium subscribers.
Also, the brokerage’s note pointed out that RJio’s new family postpaid plans effectively cap the customer outlay at Rs205-235/month and would likely delay the chances of a price increase and 5G monetization until after the 2024 general elections.
It also said, “We now plan for smartphone prices to go up by 20% in June 2024, instead of September 2023 as we did before.”
Also, the note said that “a delayed tariff hike, while bad for the sector as a whole, would hurt Vi’s hopes of staying in business the most. It could also lead to a duopoly, which would likely help Bharti and R-Jio gain market share faster.”
According to Kotak’s note, Vi is the worst impacted by delays in tariff hikes with its FY2024E cash EBITDA declining to ~Rs63 billion (from the current Rs80 billion annual run-rate) (from the current Rs80 billion annual run-rate).
Without expedited fundraising, the brokerage does not expect Vi’s capex to inch up meaningfully to bridge the gap on 4G coverage or roll out 5G, which would result in further market share erosion.
So, Kotak’s note said, “According to our estimates, Vi faces a cash shortfall of Rs55 billion over the next 12 months and a delay in tariff hikes/fund-raising. This could lead to Vi shutting down and faster market share gains for R-Jio and Bharti.”
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Source: Team CurrencyVeda