Sandeep Shah of Sampriti Capital said the market appears to have already factored in the winners and the losers post the 2G verdict.
Sandeep Shah of Sampriti Capital said the market appears to have already factored in the winners and the losers post the 2G verdict. "All the investments that these telecom companies made will now be in jeopardy," he said. Suppliers, vendors etc who may or may not have circumvented the law were likely to take a hit as well, he added.
For GV Giri of IIFL though, the incumbent telecoms are the winners while the losers are the ones like Idea, Tata Tele, Videocon and Unitech whose licenses got cancelled.
Will Verdict Bring Telco Players Back?
Among the telecom firms, 11 companies have been severely affected. Foreign telecom players cannot afford to overlook India. While the appetite for the 3G auction was huge, analysts are pondering whether a new 2G spectrum auction will get players participating again. Note that Docomo and Uninor already have their presence felt in India.
Giri says from those whose licenses were cancelled, the only serious competitors were Uninor and Sistema on a pan India basis. The nine circles of Idea were marginal to their overall operations but Uninor and Sistema certainly will come back. “They have been saying that they hope to stay in India for a long time. Now we have to wait and see whether when the dust settles if they will come back and bid.”
Bharti and Idea which are expected to be the biggest beneficiaries of this, has Giri giving a thumbs up to buy both stocks, in lieu of the present situation. Between the two, he said that Idea should be the one to give better upsides because the comparative pressure which is keeping tariffs down should probably ease very quickly. “If tariffs go up Idea should probably respond much better,” he said.
Sampriti Capital has been bullish on Bharti for quite some time and continues to remain bullish. "But you don’t want to chase Bharti in all this euphoria. You want to wait for the dust to settle down and Bharti should be a core part of ones portfolio from a longer-term perspective."
Ashish Basil of Ernst & Young declined to comment on the key takeaways until there was clarity about whether there is a continuance process because if there is no continuance then he finds that there is a problem. But if there is a continuance possibility in terms of re-auction or TRAI can come out with some guidelines then it’s a different impact.
On talks of the sector consolidating, Giri said it could happen in a variety of ways. “One is that subscribers will move to the incumbents, second is that the cancelled licenses will have to see the spectrum surrendered and that will get re-auctioned and in all likelihood go to the incumbents and thirdly some of the deserving companies will probably be bought out if they are not saddled with huge debt.”
The impact, however, of this issue is slightly broader because this affects not only the telecom companies but the telecom ecosystem as a whole, he said.
“There are tower companies who are also dependent on the business from some of these operators. If the operations are to be ceased then what happens to the financials of some of these tower companies or for that matter where there is also a large bank exposure,” asked Basil.
Giri said that the verdict was a step in the right direction for the protection of transparency and telecom was one of the worst affected. So sentimentally there should be a big improvement.
READ MORE ON 2g scam verdict, telecom sector, Sandeep Shah, 2G verdict, GV Giri, IIFL, Bharti, Idea, Ashish Basil, Ernst & Young, TRAI
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