As per BoFA Securities, the Supreme Court (SC) agreeing to hear the Department of Telecommunications’ (DoT) rescue plan for the telecom sector in the next hearing is good for Vodafone Idea Limited (VIL).
Recently, the bench had stated that the DoT’s plea seeking reasonable time will be considered at the next hearing in two weeks.
Further, BoFA Securities added, “Given the fact that the SC is going to hear the government’s rescue plan after two weeks, we believe there remains hope for VIL (if the court agrees to the Government’s plan). From Bharti’s perspective, they have to pay higher than initial expectations on AGR dues. We think even in this environment Bharti should be able to manage it.”
“In our view the government will wait for the apex court’s decision after two weeks. Based on the decision, it could look in to further relief. For instance, the government could potentially create a telco fund (as suggested in the media) and give cash to affected telcos to pay to court immediately and over time get the telcos to repay at a soft interest rate,” it added.
As per BoFA securities, VIL’s ability to invest in capex will go down which will further help both Bharti Airtel and Reliance Industries (Reliance JioInfocomm) to capitalise in terms of market share.
Further, it also expects to see a faster pace and magnitude of tariff hikes in the sector.