Airtel, Idea, RCom plunge upto 6.6% as Reliance Jio raises 2G auction bar

NEW DELHI: Shares of telecom companies such as Bharti Airtel, Idea Cellular and Reliance Communications plunged 3-6 per cent in morning trade on Thursday on concerns over the possibility of high bidding prices at the spectrum auction, slated for next month, after eight companies submitted applications, signalling a stronger-than-expected competition.

Bhart Airtel plunged as much as 4.8 per cent, Idea Cellular dropped as much as 6.6 per cent and Reliance Communications dropped 3.7 per cent in today's intraday trade.

At 10:50 a.m.; Bharti Airtel was trading 4.3 per cent lower at Rs 317, Idea Cellular was down 5.4 per cent to Rs 159.15. Reliance Communications slipped 3.1 per cent to Rs 122.80.

Reliance Jio Infocomm joined top telcos Bharti Airtel, Vodafone India and Idea Cellular in applying to bid for spectrum in auctions beginning February 3, setting the stage for a grand fight, especially in the 900 Mhz band.

By getting the spectrum, Reliance Industries would be able to launch basic mobile phone services along with its yet-to-be launched 4G venture.

Credit Suisse says Reliance's entry could mean "intense" bidding at the auction, and increase competition in the sector in the longer term, Reuters reported.

Credit Suisse downgraded Bharti Airtel to "neutral" and has also slashed its target price to Rs 310 from Rs 410 earlier. The brokerage also downgrades Idea Cellular to "underperform" from "outperform", citing the higher-than-expected bid applications as a "negative surprise".

The target price for Idea Cellular was also reduced to Rs 130 from Rs 190 earlier.

The brokerage firm has also slashed earnings of Bharti Airtel and Idea Cellular by 22-38 per cent for FY15/16. Bharti Infratel is the only stock with ‘Outperform’ rating.