Most telecom stocks end higher a day after 3G auction

New Delhi, May 20 (IANS) Indian stock markets Thursday reacted positively to telecom companies winning precious airwaves for third generation (3G) phone services, with most of their scrips trading in the green a day after the conclusion of auctions.

But analysts remained concerned over the high debt these companies may have to bear to pay off the licence fee of a whopping Rs.67,718.95 crore ($15 billion) to the Indian government within the stipulated period of 10 days.

At close Thursday, the stocks of telecom players like Bharti Airtel and Idea, which got a sizeable chunk of the spectrum, along with the state-run Mahanagar Telephone Nigam Ltd (MTNL) ended in the green at the Bombay Stock Exchange (BSE).

The scrip of Bharti Airtel, which will have to fork out Rs.12,295.46 crore for 13 circles, closed at Rs.260.15, up 0.23 percent, while Reliance Communications, which will pay Rs.8,585.04 crore, also for 13 circles, closed 0.73 percent lower at Rs.135.80.

Idea’s scrip was up 0.95 percent at Rs.53.25. The company owes the government Rs.5,768.59 crore for 11 circles.

The scrip of MTNL — which had already been allotted 3G spectrum but has to match the auction price of Rs.6,564 crore for its two circles of Delhi and Mumbai — shut shop 0.53 percent higher at Rs.56.45.

Reliance Communications also opened strong and was up 5.7 percent percent at Rs.144.70, which was the intra-day high. At close, however, profit booking brought the scrip down by 0.73 percent to Rs.135.80.

Analysts said the optimism around telecom stocks is not expected to last long as the high licence fees will add pressure to the already squeezed margins of the operators. Also, a major tariff war has meant that average revenue per user has been falling.

‘The numbers are so huge, unrealistic that one would eventually expect a consolidation in the sector. After all $3-4 billion is not small change,’ said Mahesh Uppal, a telecom industry expert and director of consulting firm Com First.

The auctions of airwaves for third generation (3G) telecom services to private players concluded Wednesday evening after 34 days and 183 rounds. The auction for broadband spectrum is slated to start Saturday.

‘The 3G auction price will certainly act as a trigger for consolidation in the sector,’ said Jagannadham Thunuguntla, the equity head for leading brokerage firm SMC Capital.

‘But in the meanwhile, investors are not going to be kind to telecom stocks as the price paid for spectrum has been way above expectations,’ Thunuguntla told IANS, adding these stocks were already out of favour since last year.

Agreed Sanjay Dutt of Quantum Securities, a leading brokerage and think-tank on the capital markets. In shakeouts like these, the hit is always taken by the dominant player, he said referring to Bharti.

‘I see Reliance emerge as the real winner in this whole game. It has managed to acquire 80 percent of the top circles for what – something like Rs.8,500 crore! It can now easily acquire access to the remaining circles,’ Dutt told IANS.

He went on to add that the fact that Reliance was a player on both the GSM and CDMA markets — two main technologies for mobile telecom services in India — would also go a long way in deriving the best out of its available infrastructure.

The prized Delhi and the Mumbai circles were won by Reliance Communications, Bharti and Vodafone. In all, Reliance, Bharti and Aircel won the largest number of 13 circles, followed by 11 for Idea, nine each for Vodafone and Tata, and three for S Tel.

(James Jose can be reached at james.jose@ians.in and biz@ians.in)

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