Telecom Stocks Outlook for the week – 11 to 15.09.2017

Telecom Stocks Outlook for the week – 11 to 15.09.2017

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Telecom Stocks Outlook for the week – 11 to 15.09.2017 )

 Shares of most companies seen weak Stocks of most telecommunications companies are seen trading lower next week as long-term outlook for the sector remains negative due to intense competition after the entry of Reliance Jio Infocomm Ltd. Companies in the sector are facing stress on their revenues after being forced to lower tariffs to match those offered by Reliance Jio. The debt-laden sector is expected to see further stress if the market experiences heavy demand for Reliance Jio's fourth-generation mobile phone. The telecom arm of the Reliance Industries Ltd has so far received 6 mln registrations for booking its phone and aims to start deliveries during Navrati season. Customers of the phone, which comes with a one-time refundable deposit of 1,500 rupees, can enjoy unlimited voice and data for 153 rupees a month. With Reliance Jio's feature phone broadening its addressable market, competitive intensity may likely lead to weaker revenue and profitability for Bharti Airtel Ltd. Moreover, stocks may also take cues from a likely announcement by the Telecom Regulatory Authority of India on review of interconnect usage charges. While Reliance Jio wants these charges scrapped, other players such as Bharti Airtel Ltd, Idea Cellular Ltd, and Vodafone India Ltd want it raised to 30 paise a minute from 14 paise a minute. According to CLSA, the regulator is likely to cut interconnect usage charges from 14 paise a minute to 10 paise a minute. If this happens, Bharti Airtel would see a 2% fall in its earnings before interest, tax, depreciation and amortisation while Idea Cellular's EBITDA would fall 3%. Interconnect usage charges, or mobile termination charges, are paid by one operator to another to land calls on the latter's network. Any cut in these charges impacts both revenue as well as access costs for mobile operators. Research firm ICRA continues to hold a negative outlook for the sector, which will keep facing headwinds due to competition and the industry revenue is expected to come down to 2.4 trln rupees for 2017-18 (Apr-Mar).

Source : Cogencis Information Services Ltd.