All telecom stocks traded higher the day after India's 3G auction concluded, though analysts remained concerned about the companies' ability to pay the large licensing fees. The top three bidders - Bharti Airtel, Reliance Communications, and Idea Cellular - saw their stock prices rise between 0.9-1.8% as their shares were up in early trading. However, analysts said the price paid for spectrum licenses was much higher than expected and would add financial pressure on telecom operators already facing falling average revenue per user and price wars. The $15 billion total raised also raised expectations of sector consolidation as some players may not be able to sustain the costs.

1. All telecom stocks in green a day after 3G auction
May 20th, 2010 - 3:02 pm ICT by IANS
By James Jose
New Delhi, May 20 (IANS) Indian stock markets Thursday reacted positively to telecom
companies winning precious airwaves for third generation (3G) phone services, with all their
scrips trading in the green a day after the conclusion of auctions.
But analysts remained concerned over the high debt these companies may have to bear to pay off
the licence fee of a whopping Rs.67,718.95 crore ($15 billion) to the Indian government within
the stiputated period of 10 days.
At noon Thursday, the stocks of telecom players like Reliance Communications, Bharti Airtel
and Idea, which got a sizeable chunk of the spectrum, were all trading in the green.
The scrip of Bharti Airtel, which will will have to fork out Rs.12,295.46 crore for 13 circles, was
ruling at Rs.261.90, up 0.91 percent, while Reliance Communications, which will pay
Rs.8,585.04 crore for as many circles, was up 1.5 percent at Rs.138.85.
Idea’s scrip was up 1.8 percent at Rs.53.70. The company owes the government Rs.5,768.59
crore for 11 circles.
The scrip of state-owned Mahanagar Telephone Nigam Ltd (MTNL) — which had already been
allotted 3G spectrum but has to match the auction price of Rs.6,564 crore for its two circles of
Delhi and Mumbai — was ruling 1.6 percent higher at Rs.57.05.
But analysts said the optimism around telecom stocks is not expected to last long as the high
license fees will add pressure to the already squeezed margins of the operators. Also, a major
tarrif war has meant that average revenue per user has been falling.
“The numbers are so huge, unrealistic that one would eventually expect a consolidation in the
sector. After all $3-4 billion is not small change,” said Mahesh Uppal, a telecom industry expert
and director of consulting firm Com First.
The auctions of airwaves for third generation (3G) telecom services to private players concluded
Wednesday evening after 34 days and 183 rounds. The auction for broadband spectrum is slated
to start Saturday.
“The 3G auction price will certainly act as a trigger for consolidation in the sector,” said
Jagannadham Thunuguntla, the equity head for leading brokerage firm SMC Capital.

2. “But in the meanwhile, investors are not going to be kind to telecom stocks as the price paid for
spectrum has been way above expectations,” Thunuguntla told IANS, adding these stocks were
already out of favour since last year.
Agreed Sanjay Dutt of Quantum Securities, a leading brokerage and think think on the capital
markets. In shakeouts like these, the hit is always taken by the dominant player, he said referring
to Bharti.
“I see Reliance emerge as the real winner in this whole game. It has managed to acquire 80
percent of the top circles for what -something like Rs.8,500 crore! It can now easily acquire
access to the remaining circles,” Dutt told IANS.
He went on to add that the fact that Reliance was a player on both the GSM and CDMA markets
— two main technologies for mobile telecom services in India — would also go a long way in
deriving the best out of its available infrastructure.
The prized Delhi and the Mumbai circles were won by Reliance Communications, Bharti and
Vodafone. In all, Reliance, Bharti and Aircel won the largest number of 13 circles, followed by
11 for Idea, nine each for Vodafone and Tata, and three for S Tel.