Telecom sector poised for growth: Analysts bullish on these large-cap stocks, here's why

As Nifty50 and Sensex hit all-time high levels, a foreign brokerage, UBS, has released an insightful report on the telecom sector, projecting notable shifts and upgrades for major companies. The brokerage foresees a substantial 15-20 per cent increase in mobile prices over the next 12–24 months, driven by anticipated relief measures and regulatory support from the Indian government.

Additionally, Anil Singhvi, Managing Editor, Zee Business, is also bullish on the sector for the next two years.

Why is UBS bullish on the telecom sector? 

UBS analysts believe the market is already factoring in the anticipated price hikes, which are expected to materialise within the next two years. This optimism stems from potential relief measures such as Adjusted Gross Revenue (AGR) reductions by the Supreme Court or equity conversions and moratoriums by the government. The government's stated objective is to ensure the viability of three private telecom operators, a move that would bolster industry stability and competition.

Anil Singhvi's views on the telecom sector

On April 23, 2024, Zee Business Managing Editor Anil Singhvi gave a positive outlook on the telecom sector. He recommends that investors should consider putting a significant part of their money into telecom for the next two years.

Anil Singhvi on Telecom Sector: Importance of telecom in India's growth

Here are some important points for investing in the sector:

• Telecom is crucial for India's digital transformation.
• India has the highest data consumption in the world.
• Telecom infrastructure is vital for economic growth, especially in technology and digital payments.

He recommends investing in major telecom companies like Bharti Airtel, Vodafone Idea, and Reliance Jio.

Singhvi also expressed that there are challenges like pricing issues and uncertain regulations, but he believes these are opportunities for growth, not obstacles.

Brokerage Stock Recommendations on Telecom Companies

Telecom Stock Recommendation: Buy Vodafone Idea shares

UBS has upgraded the rating on Vodafone Idea Ltd (VIL) from 'neutral' to 'buy'. The brokerage has increased the target price to Rs 18 from Rs 13.1. According to the brokerage, this upgrade is based on the expectation of government relief on dues, which would be most beneficial to VIL given its heavily leveraged position. UBS analysts highlighted that the company is uniquely positioned to benefit from any government intervention, potentially resulting in a substantial 70-80 per cent upside in the stock. The stock is currently trading at an 11x FY26 EV/EBITDA, comparable to industry giants Airtel and Jio. A few days ago, Nomura upgraded Vodafone Idea to 'neutral' from 'reduce' with a target price of Rs 15.

Telecom Stock Recommendation: Bharti Airtel

For the Bharti Airtel stock, UBS has maintained its 'neutral' rating while raising the target price to Rs 1,430 from Rs 1,310. According to the brokerage, the company's stable position in the market and consistent performance justify the cautious optimism reflected in this rating. While no significant upgrades have been made, the revised target indicates a positive outlook within the competitive landscape.

A domestic brokerage, ICICI Direct, also released its report on May 17, 2024, in which it suggests buying the stock for the long term with a target price of Rs 1,630.

Telecom Stock Recommendation: Indus Towers

UBS has retained a 'neutral' rating on the Indus Towers stock while raising the target to Rs 355 from Rs 220. This adjustment reflects measured optimism about Indus Towers' growth prospects and its strategic importance within the telecom infrastructure sector, according to UBS.

Moreover, a week ago, FundsIndia also recommended buying the stock for a target of Rs 406.