Telecom stocks rise after Government approves major reforms, allows 100% FDI

Telecom stocks are in the spotlight after the government approved major telecom reforms.

The Union Cabinet placed a four-year moratorium on the payment of Adjusted Gross Revenue (AGR) dues on September 15, bringing relief to the debt-ridden carriers Vodafone Idea and Bharti Airtel.

The administration hopes to increase the spread and penetration of broadband and telecom connectivity in the country with the reform initiatives. With the latest set of reform measures, the government hopes to increase 4G spread, infuse liquidity, and create a favorable environment for investment in 5G networks.

Vodafone Idea's stock rose the most on the BSE, reaching the upper circuit. It was up Rs 0.89, or 9.97 percent, to Rs 9.82. It reached a high of Rs 9.82 and a low of Rs 9.82 during the trading day. There were 28,452,960 shares on the market with pending buy orders, but no sellers.

Indus Towers, Reliance Communications, Vindhya Telelink, Sterlite Tech, and Bharti Airtel were among the other telecom gainers, each increasing by 1-6 percent.

Other telecom dues, such as those for spectrum purchased in previous auctions, are likewise exempted from the four-year moratorium, with the exception of the just conducted auctions earlier this year.

The postponement is safeguarded by an interest component, which the telecom companies will be required to pay at the rate of MCLR plus 2% beginning on October 1, the first day of the moratorium period.

Vodafone Idea, a joint venture between the Aditya Birla Group and the Vodafone Group in the United Kingdom, has paid Rs 7854 crore in AGR dues, whereas Bharti Airtel has paid Rs 18,000 crore.

Both Vodafone Idea and Bharti Airtel have attempted to decrease their AGR dues through legal channels, but their efforts have so far been unsuccessful. The telecoms had also filed a review case for a Supreme Court judgement from July that had dismissed their requests for recalculation of their AGR liabilities, stating that the dues were calculated incorrectly by the telecom department.

The Cabinet also approved a 100% FDI (Foreign Direct Investment) in telecom via the automated method.