Share Prices of Indian Telcos Declined owing to Ongoing Spectrum Auction

Published Date : Mar 16, 2015

Telecom shares in India came under extreme pressure on by the end of Monday, March 16, 2015 as investors are frightful for the ongoing bids in the current spectrum auction might have far surpassed the prior estimations. The shares of the Idea Cellular dropped the most that is around 5%, and was followed by Reliance Communications, which declined around 4.1%. The market leader Bharti Airtel declined approx. 3%. However, the general benchmark indices closed at only 0.2% down.

Barclays stated in a publication dated March 12, 2015, that the entire bidding in the progressing auctions is considerably ahead of what they have anticipated, outflows for the operators are higher by 30 to 50% against what they have expected initially. The bids by the telecom operators have been approx. 80% more than what the government had put as the base price. The bidding has arrived at its final leg. The higher spectrum expenditure is expected to put additional pressure on the already prolonged balance sheets of telecom operators.

Telecom stocks had assembled in the previous week on the reports that Reliance Jio had not participated aggressively in the auction. As on March 11, 2015, on the eleventh day of auction, the bids valuing US$159.14 billion had come across several bands. The department of telecom is yet to provide the firm-specific data. Various analysts sense that the pressure on telecom companies will be comparatively lower as the government has permitted the payment on a deferred basis where they will have to give just 25-33% as upfront payment. The companies are likely to increase rates that analysts consider will act as drivers for the stock prices.