Limited impact on telcos from interest rate hike

The global market has been in an uneasy position since the COVID-19 pandemic arrived in 2020. Since then, a lot has happened, including the ongoing war between Russia and Ukraine. The global economy has been affected negatively, and it has led to governments hiking interest rates. While the hike in interest rates has affected each and every sector in India, the telecom sector has been bulletproof.

Regardless of the forex fluctuations or the rising interest rates, the Indian telecom operators such as Vodafone Idea and Bharti Airtel are unlikely to see any negative effects. JP Morgan said this in a note which mentioned that Airtel’s exposure to the forex rates and the interest rate fluctuations would impact its PAT (profit after taxes) by 1%, 2% and 3% in FY23, FY23, ad FY25, respectively. For Vodafone Idea, JP Morgan said similar figures.

Indian telcos are in a safe zone because the debt from the spectrum and adjusted gross revenue (AGR) dues have been fixed at a particular INR rate, and thus the interest rate sensitivity is less than feared, JP Morgan said.

Tariff Hikes and 5G revenues give investors something to look forward to
The tariff hikes that will be possibly implemented in the coming months, as well as the launch of 5G networks in the second half of the year, give the investors something to look forward to. The telcos have been pouring in money to develop relevant use cases for 5G, and most of the use cases successfully demonstrated so far show us that enterprises will need the services from telecom operators really soon.

This means that more B2B revenues would flow in for the telecom operators, thus, increasing their overall earnings. The telecom operators have got a lot to look forward to as the economy turns digital, and the telecom sector is going to reap benefits from it. TelecomTalk