Bharti Airtel Shares Tumble As Reliance Jio Gears Up For 4G Launch

Shares of Bharti Airtel fell over 2.5 per cent to Rs 349 today, extending their two-day decline to nearly 5 per cent. Bharti Airtel was the biggest loser among Nifty50 stocks today. Other telecom stocks Idea Cellular and Reliance Communications were also under pressure today, both down nearly 1 per cent.

The weakness in telecom stocks comes at a time when Reliance Jio has started taking registrations from interested people for network trials, signalling that a launch may be around the corner.

"Competition could intensify as Reliance Jio may offer cheaper and faster data services starting second half of FY17 as it is backed by sufficient spectrum assets and access to funds," global rating agency Fitch said in a recent report. 

Domestic brokerage IDFC Securities also warned about the aggressive competition existing telecom players are likely to face from Reliance Jio.

"Amid the changing landscape, Reliance Jio is gearing up to offer a complete communication services bouquet on an all-IP network which could disrupt the marketplace," the brokerage said. It predicted innovative pricing strategies from Jio to grab higher revenues.

Bharti Airtel shares have underperformed the market over the past one year, falling over 15 per cent as compared to a marginal gain in Nifty50 index during the period. Apart from rising competition, Bharti Airtel shares have also been weighed down by high debt concerns.

The forthcoming spectrum auction will further increase the debt levels of telecom operators, analysts say.

"Reliance Jio is coming is more of a digital company than a telecom company and could give serious amount of threat to existing companies, "said Deven Choksey, MD of KR Choksey Securities. He is not optimistic on the telecom space from a time horizon of two years. 

High capex levels are another big worry for investors. Bharti Airtel plans to spend Rs. 60,000 crore over three years on it network. 

However, buyback back of shares and recent moves to sell African assets to pare debt have lent some support to the stock, traders said. 

Shares of Bharti Airtel ended 2.6 per cent lower at Rs 348 as compared to a 0.24 per cent decline in Nifty50. (With Agency Inputs)