Telecom stocks ride euphoria over airwaves

Telecom stocks jum*ped up to 8 per cent on Tuesday in the midst of spectrum auction that generated bids totalling Rs 46,000 crore on Day 2. Experts pointed out that while aggressive bidding in 900MHz auction was in line with expectations, the bidding was moderate in 1,800 MHz auction.

Bharti Airtel, the largest telecom operator by subscriber base, rose 3.43 per cent to Rs 316.45. It was the top Sensex performer for the day. Reliance Communications (RCom), the fourth largest domestic operator, rose 2.90 per cent Rs 124.25. Idea Cellular climbed 7.70 per cent to close at Rs 151.15.

“Idea stock was supported by the Supreme Court ruling which ordered the department of communication to transfer Spice’s licences for Punjab and Karnataka to Idea Cellular,” said Naval Seth, a telecom analyst with Emkay Global Financial Services.

“We believe, Day One’s auction was in line with market expectations, with 900 MHz auction observing higher biddings and 1,800 MHz band witnessing moderate bidding,” Seth said.

The gains in telecom stocks were in contrast with the BSE benchmark Sensex that barely managed to close flat for the day amid turmoil in global markets. Telecom stocks have fallen between 4 per cent and 10 per cent year-to-date amid fears of irrational biddings and Reliance Jio’s entrance into the bidding process.

“The 900 MHz auction was important, as few operators, such as Bharti and Vodafone, were looking to retain spectrum in the 900 MHz band to continue their services. However, if we look at 1,800 MHz auction, except for Gujarat and Bihar, there was hardly any competition in the rest of the 20 circles,” said Rikesh Parekh, AVP at Motilal Oswal Securities.

Three circles—Delhi, Mumbai and Kolkata—saw 50-68 per cent higher average bid prices in 900 MHz band than their respective reserve prices till day 2, data showed after the market hours of Tuesday.

“We believe investors had anticipated competitive bidding given the reduced spectrum prices. With auctions out of the way, clarity will emerge in the sector on regulatory cost as well as competition fronts,” said Sandip Agarwal and Omkar Hadkar of Edelweiss Securities.

On 900 MHz auction, the two analysts believe Bharti and Vodafone may have bid for eight blocks each in Delhi as both the operators hold 8MHz each in the circle.

“Similarly, Kolkata may have received bids from both as Bharti holds 6.2MHz and Vodafone holds 7.8MHz in the circle. Mumbai, on the other hand, is likely to have received bids by Vodafone for eight blocks (to retain its current holding), eight from Bharti and balance five from Idea Cellular (Idea),” they said.

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