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Telecom stocks rally on report govt may cut license fee in Union Budget
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Telecom stocks rally on report govt may cut license fee in Union Budget
Jul 4, 2019 4:55 AM

Telecom shares rose in the afternoon session on Thursday, led by Vodafone Idea and Reliance Communications, which rose between 5 percent and 10 percent, respectively.

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The gains come following a report by brokerage Bank of America Merill Lynch which said the telecom minister Ravi Shankar Prasad has set up a committee to look into the rationalization of levies.

At 1:06 PM, shares of Vodafone Idea were up 7.63 percent, Reliance Communications gained 5 percent, GTPL Hathway advanced 2.95 percent while Tejas Networks was up 2.87 percent.

As per the report, Prasad is seeking a relief package for telcos and has sought a cut in GST rate to 12 percent from 18 percent from the government in Friday's Union Budget. The proposal, if approved, would help lower the monthly mobile bills of consumers.

“As per media, the government is looking for a 25 percent cut in the license fee from 8 percent to 6 percent by looking to reduce Universal Services Obligation Fund (USOF) levy by 2 percent," the report read.

According to the brokerage, in such a scenario, the EBITDA of Vodafone Idea Ltd/Bharti/Reliance Industries Ltd would increase by 9 percent/4 percent/1 percent, respectively. This would result in an increased fair value of these three stocks by 44 percent/7 percent/2 percent.

"We find Vodafone Idea the most levered to upside and consider them to be biggest beneficiary,” the report added.

Catch all the latest and live updates here on CNBC TV18 Market Live Blog.

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions.

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