FE Editorial : Telecom’s new ring
The Financial Express: Nov 17 2012, 01:14 IST
Though the EGoM is yet to take a decision on whether to lower the reserve price for important circles like Delhi and Mumbai (which account for 40% of the all-India reserve price) where no bids were received in the just-concluded telecom auction, several brokerages are already assuming this is a done deal and are re-rating telecom stocks that were down in the dumps just some weeks ago. The fact that several other parameters are looking better in the September quarter also suggests some pricing power may be coming back. As our front page story today points out, Bank of America Merrill Lynch has upgraded Bharti Airtel and Idea to a ‘buy’ from ‘neutral’, Kotak has raised its target price for Bharti from Rs 300 per share to Rs 325, from Rs 90 to Rs 101 for Idea, and from Rs 43 to Rs 50 for RCom. How important the EGoM’s decision will be is best seen from the impact on the Rs 30,000 crore that industry has to pay for the ‘extra’ spectrum it currently holds. In the case of Bharti Airtel, for instance, Kotak estimates the per share negative impact is R22, so a one-third cut, say, in the all-India reserve price, will give the Bharti Airtel share an upside of R7. A similar cut in the base price of the 900 MHz spectrum that is up for refarming will give an even bigger kick to telco share prices.
While subscriber churn continues to be very high—for every 10 subscribers
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