Indian Telecom sector is expected to start providing 5G based services by 2020. Recently, an IMG for resolving telecom industry issues was setup to make sector ready for upcoming modernisation in cellular services. However, no bigger solution has came out till now for industry. Few steps that has been requested by companies to help in lowering debt includes 1) to lowering the spectrum cost 2) increase time period for payments.
To explore more, IMC or Indian Mobile Congress has also been started that will last for three days. Leaders of different telecom companies such as Mukesh Ambani, Sunil mittal and many more have joined this Congress.
However, i am writing this post to share my views on telecom sector and how a investor or trader can approach it. There is no doubt that Telecom services is a bag of growth for Indian economy. With better services, engagement in digitality by consumers becomes easy. In past one year, Jio has transformed the whole picture of data services in India. While it also pressurized the other telecom companies, it gave a way of enabling free-calling in india. However to give a tough competition to Jio and sustain in this competitive market, many companies have opt to merge and acquire other companies.
Bharti Airtel which has acquired telenor and tikona still is in the good situation as company is earning reasonable amount of profit and also runs other businesses which are not yet affected by Jio. That’s why we have not seen any large selling in stock in past one year as investors are confident that company will deliver a good growth in long run.
Idea which is now working on the process of merger with Vodafone is on the way and is expected to be completed soon, after which it will form the largest telecom company in industry by subscribe base. It was a positive step taken by management for investors of Idea. But the merger which got dealed at lower price of stock discouraged the investors mood. And therefore, we seen a large jump in Idea’s share which last only for few weeks. However, merger with vodafone is great for Idea’s investors in long run. That’s why, i have recommended to buy Idea as a good bet on telecom sector for long-term.
Rcom or reliance communication which is owned by Anil Ambani is on the way of merging its wireless business with MTS and Aircel. Whereas MTS deal would possibly complete in next few weeks, aircel merger and tower sale to Brookfield is expected to be complete before december end. We have seen large selling in Rcom’s stock in past few months because of aircel merger which is taking too much time and facing hurdles. If banks finds management of company unable to complete these transactions before end of December, it is expected that lender will proceeds insolvency steps against company. However, Company can still use other steps to reduce debt if transactions get not completed.
In past months, investors have loosen much of the confidence on management and therefore stock is quoting below 5k market capital. From now, it is very difficult to say accurately what would happen with company in short-term. However, i don’t think that there is any way of exit for investors holding it from very high prices because still there are many chances that stock could be turn into multibagger in short-term.
Tata teleservices is another case of survival where investors have loose many of their investment in past few months and years. As per latest report of media, it seems that tata teleservices would exit from its mobile business which is making losses from many quarters. However, company could be operational through other business activities. Although i don’t see any opportunity in stock for short-term but there may be some in long-term.
So, the conclusion from all the above paragraphs is that idea can be bought as a best option from telecom space. While i think bharti airtel would give good returns but not as much as others can give. In case of Rcom, i think there is a pure risk in short-term but chances of multibagger returns are also there. And in tata teleservices, i don’t see any buying opportunity in short-term.
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