Telecom stocks are up 19% today: Here we decode why
What's the story
Telecom shares, including MTNL, Vodafone Idea, and Bharti Airtel, witnessed a major rally today. The surge was mainly due to positive market sentiment after the Israel-Iran ceasefire. During the session, MTNL's shares jumped over 19%, while Vodafone Idea and Bharti Airtel's shares rose by up to 3%. Other telecom stocks such as TTML, HFCL, Bharti Hexacom, and Indus Towers also gained between 1-5% during the trading session.
Sector analysis
Telecom sector's strong performance
The telecom sector has been witnessing a strong performance lately, especially after better-than-expected Q4 FY25 results. This has led to a major structural shift in the industry, bringing telecom stocks back into the spotlight for investors. The average revenue per user (ARPU) has improved significantly post-COVID 19, with an increasing subscriber base and rising data consumption trends further driving this change.
Financial outlook
Sector led earnings growth for Q4 FY25
Motilal Oswal Financial Services recently reported that the telecom sector led earnings growth for Q4 FY25, turning aggregate losses into a profit of ₹6,100 crore. This is a huge improvement from an ₹1,500 crore loss in Q4 FY24. The report also highlighted Bharti Airtel as a major contributor to this turnaround.
Market forecast
JM Financial on such shares
JM Financial predicts a 12% CAGR growth in telcos' ARPU over the next three to five years. This is expected to create a '3+1' player market with an ARPU requirement for Jio, not just to justify its 5G capex but also its potential listing plans. The firm has given 'buy' ratings on Bharti Airtel and Bharti Hexacom shares, and a 'hold' recommendation on Vodafone Idea and Indus Towers stocks.