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Major telecom stocks are expected to trade with a bearish bias next week as regulatory overhang over the sector remains. Bharti Airtel Ltd and Reliance Communications Ltd are expected to be slapped with fresh notices from the Department of Telecommunications soon, demanding additional revenue share. Similar notices have already been served to Vodafone India Ltd. The demand notices would put further strain on the financial health of telecom companies that currently face monetary outgo in billions of rupees on account of high cost of spectrum and one-time spectrum charge. Investors will eye whether companies would be successful in passing on the increased cost on to the subscribers and narrow down the difference between the headline tariff and the realised tariff. The headline tariff in the country is in the range of 1.2 rupees to 1.5 rupees per minute, while average realised tariff is about 35 paise per minute on account of several discounts and special tariff offers given by companies to attract subscribers.
Idea Cellular has started raising its base tariff across the country gradually and recently did away with some free minutes offering and special discounts. Bharti Airtel and Reliance Communications have also reduced free minutes and promotional offers. Since the completion of the 2G auction held in November, the stock price of Idea Cellular has increased 15.5%. Stocks of Bharti Airtel, which saw a decline of 1.6% this week, is expected to see more correction in the coming week. Reliance Communications is expected to see decline to 57 rupees in the coming sessions, while upside is seen limited to 75 rupees.
