Telecom stocks seem to be recovering after cos file for spectrum

MUMBAI: Telecom stocks seem to be recovering from the lows they suffered during the peak of tariff war, as the market gave a thumbs-up to operators filing applications for the forthcoming auction of 3G spectrum (third generation) and broadband wireless access (BWA), which will create new revenue sources for operators, besides easing voice congestion on network.

While Bharti Airtel jumped 4% to close at Rs 311.85, Idea Cellular touched a five-month high of Rs 69 on Friday on the Bombay Stock Exchange (BSE), after it applied for 3G spectrum as well as BWA, across India. Idea, the Aditya Birla group-controlled, has recouped nearly two-thirds of the fall in its share-price that it suffered in the second half of September ’09, after a new tariff war broke out in the industry. On Friday, the Reliance Communications (RCOM) stock moved up 2% to close at Rs 167.65.

Foreign operators’ decision to stay out of 3G bidding has helped Indian telcom players, said Prabhudas Lilladher research analyst Nishna Biyani. “It has saved a few thousand crores of rupees, as the bidding would have been more aggressive if foreign players had participated. That’s, to an extent, reflecting in the stock movement,” he told ET. (Watch)

“The potential for revenue from 3G subscribers is huge and there is every opportunity to lose if a telco doesn’t bid. It is positive if an operator is willing to bid pan-India,” said another analyst.

The Bharti stock, which suffered the twin blows of tariff war and market concerns over a possible acquisition of Zain Telecom, has also witnessed a strong rally.

Airtel has applied for pan-India 3G spectrum. It, along with Vodafone Essar, is analysts’ favourite for winning a majority of the circles. HSBC Securities and Capital Markets analyst Rajiv Sharma said, “We are of the view that incumbents with access to high-end subscribers are better placed in 3G auction,” he said.

However, analysts are cautious about irrational bidding, which could hurt operators. “The reasons for irrational bidding can range from corporate churlishness to using credit lines. The desire to win all circles pan-India or in some cases in circles where an operator is strongest may lead to irrational bidding,” said Kotak Institutional Equities analyst Rohit Chordia.

For RCOM, it is strategically important to have 3G spectrum in key 15 GSM markets. “Losing out may reduce its ability to gain revenue market share. However, ownership of CDMA spectrum provides it a downside support to capture data business opportunities,” said HSBC’s Mr Sharma.