Telecos M-cap up Rs 1,01,447 cr on positive market sentiments

Written by Rachana Khanzode | Mumbai | Updated: May 23 2009, 06:21am hrs
The positive market sentiment driven by expected policy initiatives to be taken in the telecom sector by the UPA government has raised the market capitalisation of telecos by Rs 1,01,447.64 crore, from the March 9 low of the equity markets. Though Bharti Airtel continues to have the largest market captilisation among the telecom companies, Reliance Communications (Rcomm) has gained the most since then.

The 30-share Bombay Stock Exchange (BSE) Sensex was at its lowest on March 9 at 8,160.4 points in the calendar year 2009. Since then, the market cap of Reliance Communications shot up by 138.6 % from Rs 27,296.66 crore to Rs 65,130.15 crore on May 22. While, Airtel touched to Rs 1,62,842.14 crore of market cap from Rs 1,11,572.65 crore, up by 45.95 % during the same period.

Analysts with broking firms feel that the increase in the market capitalisation augurs well for telecom companies. This was thanks to the higher liquidity in the system and this in generating strong returns will help them in raising money easily for opportunities like 3G auctions. Harit Shah, analyst with Angel Broking, says, The improvement in market is driven by positive sentiment and it indicates that fund requirements can be met now.

While another analyst said, The market movement will help the R Comm most as it will enable to convert its FCCBs worth Rs 5,500 crore which it took in 2007 and is expected to mature in 2011. Though the stocks might fall going ahead but we do not expect them to go down beyond 15-20%.

Telecos like Idea Cellulars touched a market cap of Rs 22026.21 crore from Rs 13888.45 crore, up by 58.59% during the same period. While Tata Teleservices shot up to Rs 5795.92 crore from Rs 3699.52 crore up by 56.67 % and MTNL shot up to Rs 5874.75 crore from Rs 3764.25 crore up by 56.07 %.

It is expected that the UPA government will start the 3G auctions in the coming two months. However, the telecom industry expects much more than just the auctions. It wants transparency in the 3G auctions with some rationalization of the revenue-sharing regime of the current 2G spectrums.

It is felt by the telecos that the present requirement of sharing 25-30 % of the revenues with the government is steep, as the tariff for telecom services in India is among the lowest in the world. While revenues per user (ARPUs) have declined, the cost of operating the service has increased manifolds.

The telecom operators are expecting the new government to recasts the current revenue-sharing regime. Also on the wish list is rationalization of spectrum charges and license fee, which are currently the highest in the world.