Telecom Stocks Outlook for the week – 22 to 26.05.2017

Telecom Stocks Outlook for the week – 22 to 26.05.2017

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 Telecom Stocks Outlook for the week – 22 to 26.05.2017 )

Movement in shares of telecommunication companies is likely to remain stock specific next week, with those of Reliance Communications Ltd seen falling. Expect continue to be negative on the sector and expect aggression by Reliance Jio Infocomm Ltd to hit operators in the sector. The Reliance Industries Ltd subsidiary launched operations in September offering free data and voice services till March, and announced competitive tariff April onwards. This has forced incumbent operators such as Bharti Airtel Ltd and Idea Cellular Ltd to announce matching tariff plans to compete, leading to pressure on margins and revenue. Hit by Reliance Jio's free services, Bharti Airtel Ltd's consolidated net profit for the March quarter fell 25.9% on quarter to 3.7 bln rupees. The company's average revenue per user in India fell 8.4% on quarter to 158 rupees in Jan-Mar. Though Idea Cellular Ltd's consolidated net loss narrowed to 3.28 bln rupees in Jan-Mar from 3.84 bln rupees the previous quarter, its consolidated revenue, including other operating income, fell 6.2% on quarter to 81.26 bln rupees. In a recent report, ratings agency ICRA said the ongoing pricing pressure, stress on operating metrics in the sector, and rising debt levels were seen weighing on the financial performance of telecom operators. The Reserve Bank of India has voiced similar concerns and has asked banks to give immediate attention to the telecom sector, and review banks' exposure by Jun 30. With an aim to recommend resolution of stressed assets at the earliest, the government too has formed an inter-ministerial group to study the financial health of the telecom sector. Rising competition in the sector after the entry of Reliance Jio has also led to consolidation. Bharti Airtel has announced two separate acquisitions of Tikona Digital Networks Pvt Ltd and the Indian arm of Norway's Telenor ASA.

Source : Cogencis Information Services Ltd.