Stocks of major Indian telcos such as Reliance Communications and Bharti Airtel lost ground on the Bombay Stock Exchange. That had more to do with the market than the telecommunications business, with the Sensex, the exchange’s representative index of 30 stocks, falling almost 2.4% or 348 points.
The Reliance stock also suffered because the company was a losing bidder in the race to acquire a 67% stake in Hutchison Essar, India’s fourth-largest mobile telecom company, according to an analyst with a leading Mumbai-based brokerage who did not wish to be named.
The United Kingdom’s Vodafone Group won the bid, for $11.72 billion, and another analyst at another Mumbai-based brokerage said that “the value at which Vodafone is buying the stake will set a benchmark for other companies and have a positive impact on the industry.”
The sentiment on the secondary market also ruined Idea Cellular’s IPO-party with the issue, which opened yesterday receiving applications for only around 45% of the shares on sale.
Reliance Communications’ announcement that it would invest Rs11,000 crore in the business in 2007-08 helped the company gain some lost ground, but the share still closed lower than its opening price of Rs 475, at Rs 455.
In contrast, the stock of Bharti Airtel, the country’s largest mobile telecom company, held on to a small gain through the day, but fell sharply by 3.2% in the last hour of trading as investors booked gains.
Bharti’s announcement that it would share infrastructure with Vodafone and its buy-back of a 5.6% stake the latter held in it, would have a positive impact on the stock in future trading sessions, said analysts.
Videsh Sanchar Nigam Ltd was the worst performer in the telecom space. Its stock price on the BSE fell by 10.21% from Rs 490 to Rs 440.
The lack of clarity on the sale of the government’s residual stake of 26% in the company is believed to have hurt the stock.