Karvy negative on telecom sector

Karvy Stock Broking is negative on telecom sector.

We expect the introduction of MNP to be a negative for the Indian telecom sector and for telecom stocks, even as it would be beneficial for subscribers. We estimate a 6-9% decline in ARPUs, a  50-82 bps negative impact on margins and consequent EPS declines to the tune of 8-39% in FY11, with consequent  changes in target prices by 7-22%. We remain negative on the sector and maintain 'Under performer' ratings on  Bharti Airtel (downgrade target price from Rs 289 to Rs 269) and RCOM (downgrade target price from Rs 167  to Rs 151), while we downgrade Idea Cellular to 'Sell' from 'Under performer' (downgrade target price from Rs  45 to Rs 35). 

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