Idea Cellular, Bharti Airtel remain muted

Investors in RCom scrip were a happy lot on Tuesday after the company’s stock price jumped by 11.14 per cent following the telecom regulator’s latest move of trimming roaming and SMS rates for consumers.

The stock hit a 52-week high intra-day at Rs 124.95 and witnessed a total traded quantity of 111.62 lakh against a two-week average of 64.48 lakh.

Amar Ambani, Head of Research of IIFL, said: “The released guidelines on national roaming by the Telecom Regulatory Authority of India being less stringent than expected, will help incumbent operators such as RCom as there would be a negligible financial impact on them. TRAI’s roaming guidelines clears one of the regulatory uncertainties hanging over the industry, though other major concerns still persist.”

However, Idea Cellular and Bharti Airtel saw a more muted reaction closing at Rs 141.50 (up 1.29 per cent) and at 291.45 (down 1.67 per cent) respectively.

2 roaming plans

TRAI on Monday said it has reduced ceilings for national roaming calls and SMS and instituted a new regime for providing flexibility to telecom service providers to customise tariffs for national roamers through special tariff vouchers and combo vouchers. TRAI has also mandated two types of free national roaming plans to be provided by all telecom service providers. These changes will come into effect from July 1.

In its latest report on the telecom sector, Phillips Capital’s telecom analyst Vivekanand Subbaraman said: “A minor negative impact on current estimates to the tune of 2-4 per cent of EPS through this move is much lower than the 10-20 per cent EPS impact that a complete abolition of roaming would have resulted in.”

“We also believe that the impact is unlikely to have any financial impact as pricing power is returning and such minor impacts are likely to be easily absorbed,” he said and added as this tariff order clears one regulatory uncertainty and telcos appear to be relatively unaffected by the order.

Telecom analysts further believe that this move could possibly mark the beginning of a long-term trend of double-digit growth of the telecom sector.

This move along with better realisations and improved operational performance on the back of consolidation and effect of industry participation in reducing freebies and lower customer churn by making customer acquisition process more stringent indicates that the industry can sustain growth at a low cost. However, they maintain that key risks include certain regulatory issues with regards to spectrum renewal in circles of Mumbai, Delhi and Kolkata, pending court cases and farfetched FY13 operating profits and capex targets by key players.

manisha.jha@thehindu.co.in

(This article was published on June 18, 2013)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.