Last update:
Shares of Vodafone Idea were the biggest gainers, rising 18.6% to their intraday high.
Telecom stocks rise
Telecom stocks, particularly those of cellular services and fixed-line providers, saw significant gains during Tuesday’s trading session, following media reports indicating that the government has offered bank guarantee (BG) spectrum to telecom operators. There was a need to provide for the purchase of Made by 2022.
Shares of similar companies Vodafone Idea. And Tata Teleservices (Maharashtra) rallied, with Vodafone Idea gaining 18.6 per cent to touch a day’s high of Rs 8.28, while Tata Teleservices (Maharashtra) rose 13 per cent to Rs 78.11. Other telecom stocks also saw strong gains, with Indus Towers up 5.5 percent, Bharti Hexacom up 4.5 percent, and Tata Teleservices and Bharti Airtel up 1.8 percent and 1.6 percent, respectively.
The move is expected to provide substantial relief to telecom companies, which collectively owe the government over Rs 30,000 crore in BGs. The decision is particularly beneficial for Vodafone Idea Ltd, which owes over Rs 20,000 crore to BGs and has struggled with its financial obligations.
The Department of Telecommunications (DoT) has supported exemptions for BGs to purchase spectrum. The 2021 telecom reforms had already done away with the need for BG for auctions starting from 2022, but the exemption for past spectrum purchases will ease the financial burden on telecom companies like Vodafone Idea.
Vodafone Idea, which was unable to pay its second BG of around Rs 350 crore on November 1 for spectrum acquired in the 2012 auction, is the biggest beneficiary of the decision. While other telecom companies, such as Airtel and Jio, have BG remaining in the coming years, Vodafone Idea’s huge outstanding liabilities make it the main beneficiary. Airtel’s BG for the 2016 auction, due in September 2025, is significantly lower, at around Rs 2,200 crore, and Jio’s BG is around Rs 4,400 crore, which is right behind Airtel.