While a few market experts see the telecom industry benefiting from the ongoing consolidating in the space, Shankar Sharma of First Global says that he stopped buying shares from the industry way back in 2007, and the space is slated to continue to experience distress. In an interview to ET Now earlier this week, Shankar Sharma pointed out that the sector had done well previously, however, now he expects the growth to remain flat. “Globally, mobile operators have a huge growth spurt and so the charts do very well, stocks do very well and then the stock just flat lines like a dead patient’s ECG,” Shankar Sharma said adding that these shares, including Bharti Airtel will remain a flat line stock.
Notably, while many top experts have repeatedly reiterated that Bharti Airtel is under pressure from Mukesh Ambani-led Reliance Jio, the shares of Sunil Mittal-run major had an excellent run at the bourses, returning more than 72% in 2017. However, 2018 has been a forgettable year for the shares, as they have corrected by nearly 20% since January.
Shankar Sharma says that the subscriber growth seems to have peaked and the ARPU numbers don’t seem to be coming through. “We stopped looking at the sector in 2007 December and that is when we published three pieces of research saying you are looking at flat lining of ARPU numbers if not outright decline, subscriber growth has already reach a fairly high level,” Sharma said in the same interview adding that he had no idea about Reliance Jio back then and Reliance Communication wasn’t a factor.
Earlier last week, the Union Cabinet relaxed spectrum holding limits and allowed telcos more time to pay for airwaves won in auction in a bid to to improve the debt-heavy and financially stressed telecom industry, a move seen to boost consolidation in the industry, with a major Idea- Vodafone merger already on the cards. While experts welcomed the move, they say that more needs to be done to provide relief to the telecom sector, which collectively owes banks/others Rs 4.6 lakh crore for and has deferred payment liabilities to the government of Rs 3.1 lakh crore. According to a recent Jefferies report, the move does little to mend balance sheets of the incumbent players as major telecom players find it difficult to service debts.