Bharti Airtel shares fall as spectrum auction begins
Telecom shares fell sharply amid the spectrum auction currently underway. Bharti Airtel was the biggest loser on the 50-share Nifty benchmark. India's biggest mobile carrier has to win spectrum in Delhi and Mumbai for continuing operations because its licence is expiring in November 2014.
A lot would depend on how much spectrum Reliance Industries wins. Reliance Jio, the telecom arm of Reliance Industries, is expected to bid for pan-India spectrum in the 1800 MHz band to enhance its existing 4G spectrum, analysts said.
The spectrum bands RIL has applied to bid for would enable the company to provide basic cellphone services, which account for more than 80 per cent of industry revenue in India. Call rates in India are among the cheapest in the world, but competitive bidding for spectrum may force operators to hike prices.
Last month, Credit Suisse had downgraded Bharti Airtel and third-ranked Idea Cellular citing increased competition and higher capex on account of RIL's surprise entry into the fray.
RIL, controlled by India's richest man Mukesh Ambani, sits on a cash pile of nearly $15 billion (Rs 93,000 crore at 1 USD= 62 rupee), which gives it an advantage at the spectrum auction over rivals like market leader Bharti Airtel, which had nearly $10 billion (Rs 60,000 crore) in debt as of end-September.
As of 11.40 a.m., Bharti Airtel traded down 2.8 per cent at Rs 306.30. Analysts expect Bharti to bid for 900 MHz spectrum in Delhi and Kolkata, but not Mumbai. Bharti's competitor Vodafone is likely to bid for 900 MHz block in all metros to retain spectrum.
Idea Cellular shares traded 0.7 per cent lower at Rs 142.45. Analysts expect Idea to bid for 900 MHz block in all metros for 3G spectrum. It may also bid for 1800 MHz in metros & circles where contiguous spectrum is available, the said.
Reliance Communications was down 0.7 per cent to Rs 122.55. Other bidders in the auction are Idea Cellular, Reliance Communications, Aircel, Tata Teleservices and Indian unit of Norway-based Telenor.
Bidding for two frequency bands (900 MHz and 1800 MHz) is likely to fetch at least Rs 11,300 crore to the government.