At 1 pm on Friday the shares of Airtel were down by 4.3 % to 329.85 on BSE with the substantial cut in fuel subsidy by the Nigerian government likely to impact its operation there even more in coming days.
Nigeria is one of the major destinations in Africa where Aitrtel has expanded its operations and it currently contributes significantly to its Africa operating profits.
The cut in the fuel subsidy in Nigeria could possibly result in doubling of retail prices of petrol or gas. This in turn could impact the telecom usage hurting telecom operators with reduced margins.
According to securities firm Religare while this is leading to a sharp civil and political backlash, we note that if approved, a sharp rise in fuel and transportation costs could impact usage for the telecom operators.