Bharti Airtel shares hit a two month low and were trading at Rs 401.5 on NSE, after the telecom company failed to bag the media rights for broadcasting the India Premier League (IPL), and the Delhi High court dismissed Vodafone India's IUC plea.
In a double whammy to Bharti Airtel, the shares hit a two month low and were trading at Rs 401.5 on NSE, after the telecom company failed to bag the media rights for broadcasting the India Premier League (IPL), and the Delhi High court dismissed Vodafone India’s plea that sought more transparency from the telecom regulator on IUC.
Star India Pvt. Ltd won television, digital, Indian and global media rights to the India Premier League (IPL) for the next five seasons for Rs16,347.50 crore, outbidding rivals such as Sony Pictures Networks India, Facebook Inc. and Bharti Airtel Ltd. Bharti Airtel’s bid came in at Rs 3,280 crore, below the social networking giant Facebook’s bid of Rs 3,900 crores.While Bharti Airtel submitted its bid for the Indian subcontinent category, Star was the only company among 13 bidders to submit a consolidated bid for IPL rights across all categories – India subcontinent, digital and rest of the world territories.
This development is likely to hit the telecom players, as the business risks have now increased, Bank of America Merrill Lynch told ET Now. Cut-throat competition has forced the telecom companies to reduce tariffs, hence the revenue from voice calling has taken a hit. With the onset of Reliance Jio’s thrust on free data, these telecom companies are looking at other avenues to bolster their income.
The shares plunged even further after Delhi High court dismissed Vodafone India’s plea that sought more transparency from the telecom regulator in its consultation process on the interconnect usage charge (IUC). The telecom regulator is considering lowering the IUC – the charge paid by operator of the network from where a call originates to the telco where it terminates – to 7-8 paise from the current charge of 14 paise.
Bharti Airtel shares have returned 36% in the year so far. In the same period, Nifty Service sector index is up by more than 25%.
Bharti Airtel’s rival Idea shares too fell by as much as 2% to hit the week’s low at Rs 85.20. Rajat Sharma, an analyst with Sana Securities, believes that the telecom space is fundamentally weak, and has very limited avenues to augment revenues. “The companies are fighting a fierce battle to no avail, the customer seems to be the only one to benefit,” he had told FE Online last month. According to him, the view for the sector remains weak, as he believes that the advent of free internet services offered by Jio provides very little opportunity for other players in the industry to add subscribers. Moreover, there are concerns that with the competitors taking active steps to build scale, Reliance Jio may further intensify its offerings, putting even more pressure on the incumbents.