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Last Updated : Feb 24, 2017 11:25 AM IST | Source: CNBC-TV18

Tulsian tells: Why telecom isn't a space for more than 3 players

With entry of Reliance Jio and a possible merger of Vodafone and Idea, the telecom sector has began to see consolidation. The space is no longer viable for more than three players, believes SP Tulsian of sptulsian.com.

With entry of Reliance Jio and a possible merger of Vodafone and Idea, the telecom sector has began to see consolidation. The space is no longer viable for more than three players, believes SP Tulsian of sptulsian.com. 

He added that other smaller players like Reliance Communication too will need to be acquired to exist. 

Below is the transcript of SP Tulsian's interview to Sonia Shenoy and Surabhi Upadhyay on CNBC-TV18.

Sonia: I wanted to discuss RBL Bank with you because that stock has zoomed today. It has been hitting new highs day after day. Any thoughts on whether it still portends a good buy?

A: The news which is floating in the market is that bank is likely to make a preferential allotment or maybe qualified institutional placement (QIP) kind of things at a price which is talked of, maybe at about Rs 500, maybe some insiders are talking a price of Rs 550 as well because these private sector banks are smartly shoring up the capital.

We have seen that happening with YES Bank also. So, I think probably that is a trigger and when you talk to the insiders or circles close to the management, they say that there seems to be even strong appetite at Rs 500 also because of this QIP expected to be seen from the bank in the time to come maybe in the next couple of months or so.

So, probably that could be a trigger but if you see the performance of the bank, I don’t think that one can match the kind of growth. I am not taking the absolute number of the banks and I have been keeping a positive stance since it has went public, initial public offering (IPO) and since then I have been advising that probably this is the best bank to have in ones portfolio amongst all the private sector banks.

Surabhi: Oil and Natural Gas Corporation (ONGC) since Sonia brought it up, lots of news through this week on the stock about this whole royalty issue whether they will play not play the company has told us that there will be at least some kind of a hit in the next few quarters what is your sense on the math?

A: I have never kept the positive view on the ONGC for the simple reason that if you see this positive news flows in spite of coming in the prices are never seen sustainable.

In fact yesterday we have seen the news item that probably they are looking for acquiring one of the oil marketing company and at that time I also said that I am not keeping a positive stance and the same view continues to remain because these kind of news flow having lot of speculation, which get build in on either side with a very near-term view. So, I will remain away from the stock by taking a positive call on it.

Surabhi: We have been talking telecom for a while if you were to look at it purely from which stock to play point of view what would you do on the two largest plays Reliance Industries and Bharti Airtel, what is your call now?

A: I agree first with Prakash Diwan that we have agreed that this space is not for more than three players. Now we are seeing Bharti, Reliance Jio and Idea-Vodafone merger seen happening. So, it is obvious or it is imperative for the Reliance Communication also to be get acquired because we have seen Telenor have all been saying they will be going in a big way in India and all that and rightfully they have taken a view to exit from India.

I am not honestly taking a positive call on the valuations at this stage on Reliance Communication because still there are lot many uncertainties prevailing on in respect to the merger, in respect to the debt prevailing in the books of the combined entity which we will be going to see post Aircel merger.

Apart from that if you take a call now which people are talking of Tata Communication getting also merged into the RComm kind of things happening, so I would say that the weak players are seeing getting assembled at one place with the huge debt coming into the books of company.

So, it is difficult to take a call now and as such since I am keeping a neutral stance on the telecom space I won’t be taking a positive call on either of them. Even yesterday also I said that Reliance Industries also should take a pause maybe at a level of about Rs 1,250 or so because large valuation factor telecom valuations have seen having factored in to the price of Reliance industries as well.
First Published on Feb 23, 2017 06:28 pm
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