Telecom Stocks Outlook For The Week - 09 to 13.10.2017
Telecom Stocks Outlook For The Week - 09 to 13.10.2017
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Stocks of most telecommunication companies are seen trading lower next week as long-term outlook for the sector remains weak due to stress on revenue streams of companies after the entry of Reliance Jio Infocomm Ltd and the recent cut in interconnect usage charges. The Telecom Regulatory Authority of India last month cut interconnects usage charges to 6 paise a minute from 14 paise, dealing a severe blow to operators except Reliance Jio. Interconnect usage charge is what an operator pays another for landing calls on the latter's network. The new charges will be effective Oct 1 and will be scrapped from Jan 1, 2020. While Reliance Jio stands to gain significantly from the cut in the charges as it will lower costs for the new entrant, the move will hit the balance sheets of Bharti Airtel Ltd, Idea Cellular Ltd, and Vodafone India Ltd that earn revenues due to incoming calls on their networks. Companies in the sector were hit by GST (goods and services tax) in Jul-Sep and the impact of IUC (interconnect usage charge) will be reflected in Oct-Dec. The debt-laden sector is expected to see further pressure if the market experiences heavy demand for the muchhyped
Reliance Jio's fourth-generation mobile phone. Tariffs are not expected to go up either as Reliance Jio will want to capture a sizable market share before raising prices. As of July end, Reliance Jio had 128.6 mln subscribers. Market leader Bharti Airtel had 281 mln subscribers as of August end. Last week, Reliance Communications Ltd called off its merger talks with Aircel Ltd. In September 2016, the company had signed binding agreements to merge its wireless businesses with Aircel. Legal and regulatory uncertainties, and various interventions by vested interests, have caused inordinate delays in receipt of relevant approvals for the proposed transaction_the company said. Reliance Communications will have to sell its spectrum to pay its obligations, adding the failure of the merger would also impact the valuation of its proposed tower sale to Brookfield group. Meanwhile, the Telecom Commission last week approved two recommendations by the inter-ministerial panel set up
to suggest steps to provide financial relief to companies. The commission approved increasing the time period for paying the spectrum bought in auctions by operators to 16 years from the current 10 years. This will improve cash flow and give companies more headroom for capital expenditure. The commission also approved a cut in the interest rate on penalty for delayed payment with respect to spectrum usage charges and licence fee payments effectively to 12% from the current 14%. Next week, stocks of most telecommunication companies are seen weak.
Source : Cogencis Information Services Ltd.
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( www.rupeedesk.in )
Stocks of most telecommunication companies are seen trading lower next week as long-term outlook for the sector remains weak due to stress on revenue streams of companies after the entry of Reliance Jio Infocomm Ltd and the recent cut in interconnect usage charges. The Telecom Regulatory Authority of India last month cut interconnects usage charges to 6 paise a minute from 14 paise, dealing a severe blow to operators except Reliance Jio. Interconnect usage charge is what an operator pays another for landing calls on the latter's network. The new charges will be effective Oct 1 and will be scrapped from Jan 1, 2020. While Reliance Jio stands to gain significantly from the cut in the charges as it will lower costs for the new entrant, the move will hit the balance sheets of Bharti Airtel Ltd, Idea Cellular Ltd, and Vodafone India Ltd that earn revenues due to incoming calls on their networks. Companies in the sector were hit by GST (goods and services tax) in Jul-Sep and the impact of IUC (interconnect usage charge) will be reflected in Oct-Dec. The debt-laden sector is expected to see further pressure if the market experiences heavy demand for the muchhyped
Reliance Jio's fourth-generation mobile phone. Tariffs are not expected to go up either as Reliance Jio will want to capture a sizable market share before raising prices. As of July end, Reliance Jio had 128.6 mln subscribers. Market leader Bharti Airtel had 281 mln subscribers as of August end. Last week, Reliance Communications Ltd called off its merger talks with Aircel Ltd. In September 2016, the company had signed binding agreements to merge its wireless businesses with Aircel. Legal and regulatory uncertainties, and various interventions by vested interests, have caused inordinate delays in receipt of relevant approvals for the proposed transaction_the company said. Reliance Communications will have to sell its spectrum to pay its obligations, adding the failure of the merger would also impact the valuation of its proposed tower sale to Brookfield group. Meanwhile, the Telecom Commission last week approved two recommendations by the inter-ministerial panel set up
to suggest steps to provide financial relief to companies. The commission approved increasing the time period for paying the spectrum bought in auctions by operators to 16 years from the current 10 years. This will improve cash flow and give companies more headroom for capital expenditure. The commission also approved a cut in the interest rate on penalty for delayed payment with respect to spectrum usage charges and licence fee payments effectively to 12% from the current 14%. Next week, stocks of most telecommunication companies are seen weak.
Idea Cellular - Down
Bharti Airtel - Up
Bharti Airtel - Up
Tata Comm - Up
Rcom - Down
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Source : Cogencis Information Services Ltd.
