BofA upgrades Vodafone Idea rating to 'Neutral' on tariff hike leverage, lifts price target to ₹14.5

Moreover, the brokerage pointed retired that the caller fundraise by the institution is expected to heighten its 4G web coverage, which could mitigate marketplace stock declines and heighten competitiveness.

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However, contempt these affirmative aspects, the brokerage refrains from recommending VIL arsenic a buy. This determination is based connected the request for further clarity regarding the betterment successful the backing presumption post-FY26, particularly arsenic the spectrum moratorium concludes.

BofA has adjusted its EPS estimates for FY 25/26 to ₹(2.7) and (1.5), respectively, factoring successful the caller superior raise. The brokerage has besides revised its terms people upward to ₹14.5 per stock from the erstwhile people of ₹9.4 per share.

BofA underscores a increasing optimism toward the momentum successful the telecom sector. The brokerage present anticipates a perchance higher magnitude of tariff hikes, ranging betwixt 20% and 25%, compared to its earlier projections of 10% to 15%. 

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This upward revision is attributed to improving currency flows, which telecom companies are expected to transmission into expanding high-margin segments specified arsenic fibre broadband, endeavor services, and information centres.

Additionally, determination is simply a statement among telecommunications companies to debar disruptive pricing strategies, contributing to marketplace stability. Another pivotal lawsuit connected the skyline is the imaginable IPO of Reliance Industries Limited's (RIL) telecom arm, Jio, a improvement that has been antecedently hinted astatine by RIL management.

BofA's bullish outlook connected higher tariff hikes is driven by the industry's corporate willingness to instrumentality them. Moreover, user receptivity to a 20% to 25% hike is expected to beryllium favourable, fixed the constricted alternatives and expanding reliance connected information services. Continued authorities enactment further bolsters this sentiment.

Also Read: FPO marks the commencement of Vodafone Idea 2.0: Kumar Mangalam Birla

Further, imaginable investments successful information centres to leverage AI-driven opportunities are connected the horizon. BofA suggests that tariff revisions whitethorn hap post-general elections, with the anticipation that consumers volition sorb the summation well. 

Also Read: Coming up successful FY25: Tariff hikes, 5G monetization and VI 2.0

If this accommodation is successful, determination is simply a higher likelihood, according to BofA, of different tariff hike wrong the adjacent 12 months arsenic telecom companies question to capitalise connected their 5G investments.

Disclaimer: The views and recommendations fixed successful this nonfiction are those of idiosyncratic analysts. These bash not correspond the views of Mint. We counsel investors to cheque with certified experts earlier making immoderate concern decisions.

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Published: 02 May 2024, 01:11 PM IST