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Friday, November 08, 2013
Telecom shares rebound; analysts see growing optimism in sector
MUMBAI, NOV. 6: Shares of telecom companies rebounded after hitting the day’s low following the Telecom Commission seeking a mid-way reserve price for the auction of spectrum.
Analysts attribute this to the growing optimism in the telecom industry, which is now seeing a return of growth after a prolonged period of uncertainty.
On the Bombay Stock Exchange, shares of Reliance Communications hit an intra-day low of Rs 144.15, but rose by 0.72 per cent to settle at Rs 146.35. Similarly, Idea Cellular scrip recovered from a low of Rs 162.15 to close 0.94 per cent higher at Rs 166.4. Only Bharti Airtel, the country’s largest telecom operator by both subscribers and revenues, ended in red. Earlier in the day, Telecom Commission – the Department of Telecommunication’s highest decision-making body - recommended higher reserve price than earlier suggested by telecom regulator for pan-India spectrum in for 900 MHz and 1800 MHz band.
The Telecom Commission has also approved the M&A policy, allowing mergers with a combined market share of up to 50 per cent.
Analysts view the ongoing regulatory developments as “positive” for the sector and believe there is more steam remaining in the counters of mobile phone companies.
“The proposed base price is being seen as reasonable this time around…hopefully, bidding by the telecom companies would not be ‘irrational’. As evident by the stock market reaction, the development is not a negative one for the industry,” said Harit Shah, Senior Research Analyst at Nirmal Bang Institutional Equities.
Of late, telecom operators have been improving the quality of revenues due to declining competition levels as a number of new operators were forced to shut shop post the 2G spectrum scam. “In the next two quarters, we expect telcos to report further improvements in operating metrics and cash flows. We are bullish on the Indian telecom space,” said Shah. The Mumbai-based brokerage firm has ‘buy’ ratings on Bharti Airtel and Idea Cellular.
Ankita Somani, sector analyst with Angel Broking, said: “Unless the reserve prices are approved by empowered group of ministers, we will not see much reaction from the telecom counters. Overall sentiments are better as regulatory clarity is emerging and a stronger business case is expected to emerge for telecom companies”.
Angel has a ‘buy’ on Bharti Airtel and a ‘neutral’ rating on Idea Cellular.