Telecom stocks slide on proposed spectrum fee

MUMBAI: Shares in India's top mobile phone operators fell sharply on Wednesday on concerns that a new wireless spectrum pricing proposal may hit company earnings.

India's biggest mobile phone firm, Bharti Airtel, saw its share price plunge 8.38 percent, or 23.9 rupees, to 261.3, while rival Idea Cellular was down 7.2 percent, or 4.3 rupees, at 55.4 in early-afternoon trade on the Mumbai stock exchange.

Nine cellular firms, including market leaders Bharti Airtel and Reliance Communications, are currently bidding in an auction of spectrum for super-fast 3G mobile services in India. A record 20.31 million users signed up for 3G last month.

Bids for nationwide licences have hit 2.65 billion dollars, nearly 3.5 times the 35 billion rupee reserve price set by the government for a pan-India 3G slot.

On Tuesday the telecoms regulator recommended that the auction price be used as the base for setting a one-time fee to be paid by firms holding 2G radio-spectrum beyond 6.2 mega hertz (MHz).

Analysts said that this could hit the earnings of top telecom operators, who are already witnessing a rise in capital expenditure due to the ongoing auctions.

"The regulator's proposal is a negative for companies like Bharti and Ideal Cellular," analysts with Mumbai-based Karvy Stock Brokers said in a note.

"Steep bidding is being witnessed in the ongoing auction and companies will have to cough up significant funds if the proposal is implemented," the analysts said.