Telecom stocks surge on Bharti move

Expectations of improved profitability sparked a rally in the battered telecom segment and shares in leading companies jumped between 5 and 16 per cent.

Expectations of improved profitability sparked a rally in the battered telecom segment and shares in leading companies jumped between 5 and 16 per cent on Monday,making them the days top performers. Telecom major Bharti Airtels move to increase call prices in some regions could mark a turning point for the worlds fastest growing market battered by a vicious price war over the last two years,analysts said.

The market anticipated a hike in user tariffs across the industry to shore up their revenue after Bharti Airtel hiked pre-paid call rates for certain packages by up to 20 per cent. Reliance Communications that emerged as the top Sensex performer today,started on an upbeat note and settled 14.91 per cent higher at Rs 107.50 per share on the BSE. Rival Idea Cellular jumped 7.97 per cent to Rs 92.10 after hitting a 52-week high of Rs 94.35 during intra-day trading. Bharti,the countrys largest telecom company in terms of subscribers,touched a one-year high of Rs 438.50 before closing 5.37 per cent higher at Rs 433 a piece. MTNL also attracted good buying and surged by 9.31 per cent to close the day at Rs 48.15.

Telecom stocks jumped on the news of Bharti Airtel raising tariffs. It is after a long time that a telecom company has some shown pricing power, Inventure Growth and Securities Head Equity Amit Chedda said.

The move is extremely positive for the sector and Bhartis tariff hike could be a sign of revival in industry tariffs going forward. This will also boost the operators earnings, said a dealer.

Bhartis move to raise prices last week is the first by an incumbent in at least two years and follows smaller rival Tata Teleservices increase in some call prices last month. Following the hike,users of Bharti Airtels Advantage and Freedom pre-paid tariff packages,which are based on per minute billing,will have to pay 60 paise per minute for local and STD mobile-to-mobile calls,Bharti had said. Earlier,the calling rate under these packages was 50 paise per minute.

Aided by the surge in telecom stocks,the Bombay Stock Exchange 30-share Sensex,which moved in and out of the positive terrain till mid-session,rallied to a high of 18,932.27 intra-day before closing at 18,871.29,up 148.99 points or 0.80 per cent. On Friday,it had gained over 286 points,bolstered by a global rally post the bailout of debt-laden Greece by European Union and IMF. The broader NSE 50-issue Nifty also rose by 46.35 points or 0.82 per cent to finish at 5,680.30.