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Idea Cellular, Bharti Airtel and Reliance Industries were the top three losers on Nifty 50 on Thursday, as a total of ₹22,483 crore in market capitalisation was lost in one single day.
Behind the fall was the launch of the much awaited Reliance Jio and its ‘disruptive’ plans.
Shares of Bharti and Idea tanked 9 per cent and 11 per cent intraday today with the latter even touching a fresh 52-week low level of ₹83.1 on the NSE.
Hold recommendations RIL closed down 3 per cent. Though not strictly and directly comparable, shares of Reliance Communications and Tata Communications also reacted and ended 9 per cent and 2 per cent lower respectively.
Analysts continue to maintain their negative stance on the sector and most have hold recommendations on Bharti and Idea.
“Pricing would be under pressure for existing players and competitive intensity will rise not only on pricing but also on services offered.
“The operators’ debt profile will deteriorate in FY17 as we expect them to incur high capex on network expansion and acquisition of additional spectrum to compete with RJio,” said Tanu Sharma, Associate Director - Large Corporates at India Ratings & Research.
Bharti Airtel, Vodafone and Idea have already undertaken preemptive price cuts by offering higher data volumes for similar pricing to retain their customers.
Contrarian view While most analysts have a negative view on Bharti and Idea, Sanjesh Jain, analyst at ICICI Securities, maintains his buy call on both.
He believes that the market and investors are under-appreciating the benefit accruing from consolidation that could offset the impact of slower industry revenue growth, at least partially (due to Jio).
“For instance, the likely event of Telenor exiting India would imply ₹34 billion adjusted gross revenue up for grab. We believe the top three operators (Bharti, Vodafone and Idea) would be major beneficiaries.
Also, revenue is available due to the winding up of CDMA services in the near term,” he pointed out. Telenor India operates in seven circles which contribute 36 per cent to industry revenue.
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