Vodafone Idea Shares Gain 23% On FM Sitharaman’s Comments

The share price of Vodafone Idea climbed 23 percent on Monday to an intraday high of Rs 4.50, reacting to Finance Minister Nirmala Sitharaman's comments.

A day after two major telecom companies posted large losses for the second quarter of 2019-20 on account of additional dues mounted by the Supreme Court's ruling on adjusted gross revenue (AGR), FM addressed a press conference. In response to a query on the telecom sector, she said, "I want no company to shut operations," and "I want all companies to flourish and serve their customers."

On 24 October, the apex court's verdict backed the telecom department's stance on including revenues from noncore items in the definition of AGR, ending a decade long dispute.

On 14 November, Bharti Airtel reported a loss of Rs 23,044 crore for the September-ended quarter on making provisions worth Rs 28,450 crore towards AGR dues, while Vodafone Idea reported its biggest-ever quarterly loss of Rs 50,921 crore on the same day.

Following the results, analysts said that Vodafone, with its low EBITDA (earnings before interest, tax, depreciation and amortization) generation is likely to get out of the competition if no major measures are taken by the government to solve the AGR issues by waving of penalties, interest on penalties or other meaningful measures.

Sitharaman said that a Committee of Secretaries (CoS) was appointed to deal with telecom companies' financial problem, however, it "has not taken a final decision yet."

According to a CNBC-TV18 report citing sources, the committee has sought recommendations from DoT on setting a minimum charge for all tariffs for telecom players and is assessing the impact it will have on the telecom operators.