The stocks are rising

K Venkatasubramanian | Updated on July 02, 2014

The competition in tariff has subsided

Generally, the Budget is not of great consequence to the telecom sector, given that key policies on licence fee, revenue share and spectrum charges are decided upon and implemented by the Department of Telecom and the Telecom Ministry.

Top mobile operators are slowly getting back to the path of revival in fortunes over the past 12-18 months with Idea Cellular leading the way with the best expansion in revenues and net profits. The heavy tariff competition has subsided and pricing power has largely returned to most key operators.

But the stock prices of the top players, barring Reliance Communications, have been slow to warm up to this change, as they already had a good run in 2012-13 from previously depressed levels. Valuations, at 18-35 times trailing earnings, too have been expensive and generally costlier than the multiples commanded by the broader market.

In FY14, all the players exercised control over employee costs, and licence and spectrum charges have not increased significantly, while interest costs have cooled down.

All this has helped top mobile operators report healthy growth in profits.

In the February spectrum auction, though a bit expensive, operators have generally bid for air-waves selectively in the 1800 MHz band.

The easier payment regime, which allows mobile service providers to pay only a quarter to a third of the charges upfront with the balance to be paid over 10 years after a two-year moratorium, has helped companies avoid taking on heavy debt.

Published on June 08, 2014

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