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Citi upgrades Vi to buy, expects telecom firms to see 15% revenue boost with tariff hike

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In Short:

Recent tariff hikes in Indian telecom firms could lead to a 15% increase in revenue, according to brokerage IIFL Securities. The impact will be visible in their December-quarter financials. Consolidation of SIM cards and the shift towards 5G will contribute to the revenue boost. Citi Research upgraded Vodafone Idea to ‘buy’, HSBC Global Research raised the stock’s target price, and other brokerages are optimistic about future tariff hikes.


Telecom Firms Set for Revenue Boost

Exciting news for Indian telecom companies! According to brokerage IIFL Securities, a significant revenue increase of nearly 15% is on the horizon. This uptick is a result of a recent tariff hike that is expected to be well-received by the market. The impact of this positive development is anticipated to be reflected in the December-quarter financials of these companies.

Positive Outlook

The brokerage highlighted, “With some potential SIM consolidation and a shift towards 5G monetization, we foresee an overall revenue boost in the range of 14-15% due to these tariff hikes.” The positive effects are expected to fully manifest in the telcos’ financial numbers by the third quarter of the fiscal year 2025.

5G Monetization on the Horizon

With the advent of 5G monetization and the recent tariff adjustments, a brighter future looms for the sector. Market leader **Reliance Jio** has kickstarted the shift towards 5G monetization, signifying a decrease in competitive intensity. This shift paves the way for potential tariff hikes exceeding expectations as early as next year.

Company Upgrades and Projections

Citi Research has upgraded Vodafone Idea to a ‘buy’ rating from ‘neutral’ and raised its share target price by 50%. Despite potential subscriber losses, the company is yet to launch commercial 5G services and expand 4G coverage.

Forecasts and Expectations

Analysts at Axis Capital project an estimated outflow of ₹45,600 crore over the next year due to the tariff hike. However, this incremental spending is not anticipated to significantly impact overall household expenditures.

Continued Optimism

Industry experts remain optimistic about the future, with expectations of another round of tariff hikes within the next 12 months. Additionally, potential future IPO plans for Jio could further bolster the sector, driving improvements in free cash flow and overall performance.

Conclusion

As the telecom sector embarks on a journey of tariff adjustments and 5G advancements, the stage is set for substantial growth and enhanced financial performance. Exciting times lie ahead for Indian telecom companies as they gear up for a promising future!

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