Loss-making Vodafone-Idea and Airtel may benefit from this government decision.
Loss-making Vodafone-Idea and Airtel may benefit from this government Choice
Shares of Vodafone-Idea and Airtel got a large boost following reports that Department of Telcom (DoT) might resolve a floor price for data and voice tarrifs. Both, Airtel and Vodafone-Idea have reported massive losses. The losses would be to the tune of thousands of crores of rupees.
While Airtel stocks jumped by nearly 10 per cent after the reports of a floor cost shares jumped by almost 32 per cent.
What is the floor price?
Flooring cost is the minimum fixed price decided by the government below which a particular thing or an agency cannot be sold. If a specific ministry or a section fixes a minimal cost then companies in that industry cannot lower costs further with an aim to lure more customers.
What’s Floor Price at Telecom likely to help Airtel and Vodafone-Idea?
Both the organizations are locked in a struggle with Reliance Jio since it’s disrupted market offering voice and data service at entirely cheap prices. There’s a constant fear in the market about Jio lowering rates to be able to better its client base.
It could restrict Reliance Jio prohibiting it to reduce its costs if a bottom price is fixed by DoT. This may help Vodafone-Idea and Airtel to Stay competitive
How bad is the problem using Airtel and Vodafone-Idea?
Finances of both companies are under strain due to price wars with Reliance Jio.
Telecom operator Vodafone Idea on Thursday reported a consolidated loss of Rs 50,921 crore – the highest ever decrease posted by some Indian corporate – to its second quarter ended September 30, due to liability arising out of the Supreme Court order at the adjusted gross earnings case.
Bharti Airtel submitted a staggering Rs 23,045 crore net loss for its July-September quarter because of provisioning of Rs 28,450 crore in the wake of the Supreme Court judgment on statutory dues.
It seems that the decision might need to go through government procedure before it turns into a fact.