Telecom Stocks Outlook for the week – 31.07.2017 to 04.08.2017

Telecom Stocks Outlook for the week – 31.07.2017 to 04.08.2017

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Telecom Stocks Outlook for the week – 31.07.2017 to 04.08.2017 )

Stocks of Bharti Airtel Ltd and Idea Cellular Ltd are seen falling further next week after missing consensus estimates for bottomline in Apr-Jun. Consolidated net loss for Idea Cellular widened to 8.15 bln rupees from 3.28 bln rupees in the previous quarter. Bharti Airtel posted a consolidated net profit of 3.67 bln rupees in Apr-Jun, down 1.6% on quarter. The battle in the sector intensified after the entry of Reliance Jio Infocomm Ltd in September put pressure on the revenue of other operators and also triggered consolidation. The recent launch of the "free" 4G mobile phone by the telecom arm of the cash-rich Reliance Industries Ltd for a refundable deposit of 1,500 rupees is expected to put further pressure on operators to launch similar offerings to protect their subscriber base. With Reliance Jio's feature phone broadening its addressable market, sustained competitive intensity may likely lead to weaker revenue and profitability for Bharti Airtel. We expects sustained competitive intensity to accelerate consolidation in industry with emergence of fewer, but stronger players. Vodafone India Ltd and Idea Cellular have announced a merger, which has received the Competition Commission of India's nod but other regulatory approvals are pending. Bharti Airtel, too, has announced two separate acquisitions, of Tikona Digital Networks Ltd and the Indian arm of Norway's Telenor ASA. ICRA, in a recent report, said it continues to hold a negative outlook for the sector, which will keep facing headwinds due to competition and the industry revenue is expected to come down to 2.4 trln rupees for 2017-18 (Apr-Mar). Taking cognizance of the pressure, the government has set up an inter-ministerial panel to recommend ways to improve the financial health of the sector. The panel has met operators and banks, and is expected to come out with its report soon. Analysts are bullish on Reliance Communications Ltd and its shares are seen trading between 25.15 rupees and 28 rupees.

Source : Cogencis Information Services Ltd.