BofA on telecom: Brokerage expects two rounds of industry-wide tariff hikes

Bank of America Securities in its latest note said that it expects Bharti Airtel and Reliance Jio to benefit from the calm competitive environment, reducing capex-to-sales ratio and improving cash-flows. The firm reiterated 'Buy' rating on both the stocks.

The brokerage however maintained its 'Underperform' rating on the shares of debt-ridden telecom company Vodafone Idea and Indus Towers, due to their unfavourable risk-reward ratio. It noted that Vodafone Idea continues to lose market share, making its fundamentals weak even with prospective relief.

BofA Securities said that a near-term bounce in stocks cannot be ruled out if government provides any dues relief to the companies. It expects two rounds of industry-wide tariff hikes, following which average revenue per user (ARPU) will likely move in line with inflation.

Early investment in network capacity, aggressive pricing, adoption of emerging technologies over the next five years will likely determine which telecom companies will lead the 2030 generative AI landscape, the international brokerage added.