Vodafone Idea to MTNL: Telecom stocks rise up to 19% in stock market rally. Do you own any?

Most telecom stocks, including MTNL, Vodafone Idea, and Bharti Airtel, registered healthy gains in intraday trade on Wednesday, June 25, buoyed by bullish market sentiment following the Israel-Iran ceasefire, which helped calm investor nerves.

Shares of MTNL surged over 19 per cent, while those of Vodafone Idea and Bharti Airtel climbed up to 3 per cent during the session.

Stocks such as TTML, HFCL, Bharti Hexacom and Indus Towers jumped 1-5 per cent during the session.

On a fresh uptrend

Several telecom stocks have seen healthy gains in the recent past after the sector's better-than-expected March quarter (Q4FY25) results.

Market participants believe the sector is undergoing a major structural shift, which is putting telecom stocks back on the investor radar.

While ARPU has improved significantly post-COVID, the sector is experiencing a growing subscriber base and a rise in data usage.

Stocks such as Sterlite Tech, MTNL, ITI and RailTel Corporation have gained 12-38 per cent over the last one month.

Brokerage firm Motilal Oswal Financial Services pointed out in its report that the telecom led earnings growth for the March quarter, with aggregate losses turning into a profit of ₹6,100 crore in Q4FY25 compared to an ₹1,500 crore loss in Q4FY24, primarily driven by Bharti Airtel. However, other peers reported muted to negative earnings for the quarter.

Experts remain positive about the sector for the long term amid expectations of sustained growth in ARPU (average revenue per user).

"We continue to expect telcos’ ARPU to grow at nearly 12 per cent CAGR in the next three to five years given the consolidated industry structure, to ensure a ‘3+1’ player market and higher ARPU requirement for Jio not only to justify its significant 5G capex but also given its potential listing plans," said brokerage firm JM Financial.

JM Financial expects the industry ARPU to grow at a 12 per cent CAGR to ₹290-320 by FY28 via tariff hikes, MBB upgrades, post-paid additions and data monetisation for a pre-tax RoCE of 12-15 per cent.

JM Financial has a buy recommendation on Bharti Airtel and Bharti Hexacom, and has a positive view on Jio. It has a buy call on Tata Communications on the expectation of improvement in the profitability of the digital portfolio segment.

JM Financial has a 'hold' recommendation on Vodafone Idea and Indus Towers.

Meanwhile, according to a PTI report, Union Telecom Minister Jyotiraditya Scindia on Tuesday said, speaking at an event of the Broadband India Forum, that duopoly is not good and there must be competition in every sector.

Earlier in the event, former telecom regulator Trai Chairman RS Sharma said there is almost a duopoly in the telecom sector with just two active service providers, and there is a need to provide more routes for giving broadband access to consumers at affordable rates, reported PTI.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.