Shares in top mobile carriers such as Bharti Airtel and Idea Cellular fell sharply on Thursday on fears that the participation of Reliance Jio Infocomm in the upcoming spectrum auction will hurt profitability of telecom companies.
Reliance Jio, a unit of billionaire Mukesh Ambani's Reliance Industries, will bid for 2G spectrum in the auction starting February 3. Cash-rich Reliance will be able to offer basic mobile phone services along with its yet to be launched 4G service if it wins frequencies in the February auction, increasing competition in the market that has about a dozen players.
Global investment bank Credit Suisse downgraded Bharti Airtel to "neutral" and Idea Cellular to "underperform" citing Reliance Jio's entry, while Goldman Sachs said aggressive bidding in the spectrum auction will open up downside risks for telecom companies such as Bharti Airtel.
"The entry of Reliance Jio and all large GSM incumbents could be a lively affair and we could see some sort of fight for spectrum," Bhavesh Gandhi, an analyst from domestic brokerage IIFL told NDTV.
Eight operators will bid for two separate frequency bands - 1800 MHz and 900 MHz - in the upcoming auction. Bharti Airtel, Vodafone and Reliance Jio are likely to bid in both bands, while Idea Cellular, Telenor, Aircel and Tata Teleservices are likely to bid for 1800 MHz band only.
Reliance Communications is likely to bid for 1800 MHz and possibly 900 MHz too.
Bharti Airtel shares fell as much as 4.5 per cent to Rs. 316.65, while Idea Cellular traded 6.5 per cent at Rs. 167. Anil Ambani-promoted Reliance Communications traded 3.5 per cent lower at Rs. 122.30 as of 10.30 a.m.
The government hopes to raise at least $1.8 billion (around Rs.11,000 crore) from the sale, crucial to its efforts to rein in the country's budget deficit.
Reliance Jio, a unit of billionaire Mukesh Ambani's Reliance Industries, will bid for 2G spectrum in the auction starting February 3. Cash-rich Reliance will be able to offer basic mobile phone services along with its yet to be launched 4G service if it wins frequencies in the February auction, increasing competition in the market that has about a dozen players.
Global investment bank Credit Suisse downgraded Bharti Airtel to "neutral" and Idea Cellular to "underperform" citing Reliance Jio's entry, while Goldman Sachs said aggressive bidding in the spectrum auction will open up downside risks for telecom companies such as Bharti Airtel.
"The entry of Reliance Jio and all large GSM incumbents could be a lively affair and we could see some sort of fight for spectrum," Bhavesh Gandhi, an analyst from domestic brokerage IIFL told NDTV.
Eight operators will bid for two separate frequency bands - 1800 MHz and 900 MHz - in the upcoming auction. Bharti Airtel, Vodafone and Reliance Jio are likely to bid in both bands, while Idea Cellular, Telenor, Aircel and Tata Teleservices are likely to bid for 1800 MHz band only.
Reliance Communications is likely to bid for 1800 MHz and possibly 900 MHz too.
Bharti Airtel shares fell as much as 4.5 per cent to Rs. 316.65, while Idea Cellular traded 6.5 per cent at Rs. 167. Anil Ambani-promoted Reliance Communications traded 3.5 per cent lower at Rs. 122.30 as of 10.30 a.m.
The government hopes to raise at least $1.8 billion (around Rs.11,000 crore) from the sale, crucial to its efforts to rein in the country's budget deficit.
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