Vodafone Idea Limited share price added over 3 percent in the morning trade on November 24, a day after the telecom service provider decided to hike tariffs.
Vodafone Idea (Vi) will hike its tariff plans for prepaid users by 20-25 percent and the increases rates would be effective November 25, the company said in an exchange filing.
“The new plans will start the process of ARPU (Average Revenue Per User) improvement and help address financial stress faced by the industry,” the release said.
Vi said the new tariff plans would also help it continue “improving India's fastest mobile network”.
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“Vi remains committed to playing its role in accelerating the realization of the government’s Digital India vision. In line with its commitment to providing its customers with simple and convenient products, Vi has curated an optimum range of feature rich plans for both voice and data,” it added.
Vi is the second company to go for a hike in the last few days. On November 22, Airtel announced that it was hiking tariffs by 20-25 percent for prepaid users.
In a BSE filing, Airtel said prepaid tariff rates would go up 20-25 percent from November 26. The rates were in line with its ARPU at Rs 200 and ultimately at Rs 300, “so as to provide a reasonable return on capital that allows for a financially healthy business model”, it added.
“We also believe that this level of ARPU will enable substantial investments required in networks and spectrum and more importantly give Airtel the elbow room to roll out 5G in India,” it said.
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Domestic research and broking firm Motilal Oswal has a neutral call on Vi stock with a target of Rs 9.30 a share. It is of the view that the telecom firm's tariff hike caters to 70 percent of its revenue pool (excluding postpaid and the B2B business), thus offering incremental revenue/EBITDA of Rs 5,500 crore/Rs 3,800 crore (2QFY22 annualised), i.e. a 14 percent/68 percent increase.
The hike should increase ARPU to Rs 128 against Rs 109 at present. The high operating leverage, given the low existing EBITDA margin of a mere 17 percent against Bharti Airtel's 49 percent, should drive higher growth compared to Bharti Airtel's 24 percent increase in EBITDA, it added.
On the other hand, CLSA has an “underperform” call on the stock, with the target at Rs 11 per share. It feels that the latest tariff hikes can boost its revenue by 10 percent, adding that entry tariff hike can further boost revenue by 7 percent.
The stock was trading at Rs 10.94, up Rs 0.36, or 3.40 percent, at 10.21 am. It has touched an intraday high of Rs 11.14 and an intraday low of Rs 10.53.Disclaimer: The views and investment tips expressed by experts on moneycontrol.com are their own, and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.