NEW DELHI: After Adani Group confirmed its entry into the telecom sector, investors dumped stock and bought shares of the troubled Vodafone Idea. shares slumped 5.2 per cent to hit the day’s low at Rs 658.95. On the other hand, shares of rallied up to 6.5 per cent to hit Rs 8.95 on NSE.
Over the weekend, India’s richest man Gautam Adani-led Adani Group confirmed that it has applied for the 5G telecom spectrum auction. However, it clarified that the intention is not to be in the consumer mobility space, which basically means the conglomerate won’t be selling sim cards in the “two-and-a-half player” (Reliance Jio, Airtel and Vodafone Idea) telecom market.
“We are participating in the 5G spectrum auction to provide private network solutions along with enhanced cyber security in the airport, ports & logistics, power generation, transmission, distribution, and various manufacturing operations,” an Adani Group spokesperson said.
Analysts fear that there is a possibility of an expanded telecom foray over time, which made investors of Bharti Airtel dump the stock today. Having gained over 26 per cent from its 52-week low of Rs 517.82 on 20 July, Airtel was the worst performer in the Nifty50 pack today.
“Plagued by an intense competitive environment in the last two decades, the thought of a new entrant in the sector gives investors jitters for the next round of severe competition, which could derail the current structural benefits (ongoing pricing improvement and market share gains),” domestic brokerage firm
Amid all the ifs and buts on whether Adani can disrupt the telecom industry, one of the options before the billionaire is to sign intercompany roaming (ICR) arrangement with Vodafone Idea for a full-fledged telecom foray. Motilal said acquiring Voda Idea in the current form and shape may require over Rs 2,500 billion in capital investment.
So is it time to stay away from Bharti Airtel stock?
Balaji Subramanian of
said until clarity emerges in terms of how many circles or which bands Adani is bidding for, telecom stocks may remain under pressure.
However, he has a buy rating on Bharti Airtel with a target price of Rs 835. “Bharti is still quite attractive considering the fact that at least the near term numbers will be quite good and there are possibilities of further tariff hikes a few months down the line. And the enterprise business of Adani will probably take a lot more time to build and I think Bharti will stay fairly resilient once the initial shock is absorbed by the market. So, I would say that once the stock probably crashes a little bit more, maybe that is a good opportunity to enter the stock,” he said.
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