Regulatory overhang biggest concern for telecom sector: Bhavesh Gandhi, IIFL

In an interview with ET NOW, Bhavesh Gandhi, Telecom Analyst, IIFL, talks about the Reliance Jio-RComm deal and gives his outlook for the telecom sector. Excerpts:

ET Now: What do you make of the deal between Reliance Jio and RComm? Do you think in the near term, RComm as a stock will get a re-rated?
Bhavesh Gandhi: In terms of the deal, this would be a step in the right direction for RComm, probably the first of many such steps if and when they want to see the leverage on the balance sheet coming down.

In that regard, yes, the stock would get near-term support, but it depends on the news flow and how the collaboration develops over and above what has been announced.

ET Now: How do the Rs 1200-crore infusion and the improved tenancy help RComm and what is your position on the stock now?

Bhavesh Gandhi: Rs 1200 crore would probably be a one-time fee right now. We have already seen the rally yesterday in the news flow. So right now, we would recommend a hold on the stock and wait for further developments.

ET Now: Do you believe regulatory overhang is lifting from the sector and which stocks do you prefer at the current juncture?
Bhavesh Gandhi: The regulatory overhang has been an issue for two-three years now and continues to be the biggest concern right now. It is more of an important issue compared the internal dynamics of the sector, the operating metrics, etc.

If regulatory overhang gradually subsides or clarifies itself further, then stocks can strengthen. From a stock perspective, I would recommend buying Bharti at current levels and holding onto Idea.