BackAre telecom earnings projections taking Reliance Jio launch into account?
While there is no clarity on when Reliance Jio's services will be launched, investors may be forced to tone down some of their expectations on tariffs and volume
Premium
Telecom stocks have done particularly well since end-June. Shares of Bharti Airtel Ltd and Idea Cellular Ltd have risen by 21% and 27%, respectively, even as the Nifty has risen by only 8%.
To some extent, this is the result of the broad market rally, in which some sectors participate during some phases while others participate during other phases. For instance, in a longer six-month period, shares of Idea have risen by 26%, lower than the 28% rise in the Nifty.
According to one analyst at a domestic institutional brokerage, valuations have reached levels where investors are assuming further delays in the launch of services by Reliance Jio Infocomm Ltd or a reduction in the assumptions on cost of capital.
More aggressive assumptions are an inevitable part of a broad market rally. Thankfully for investors, in this instance, it seems like it isn’t only a case of wishful thinking. Both the above-mentioned companies repo
The top-three companies, including Vodafone India Ltd, enjoyed a 71.3% revenue market share in the June quarter, up 90 basis points from the preceding three months and 110 basis points from a year earlier. Data revenue continues to grow handsomely and the rate of decline in data tariffs has reduced. A basis point is a hundredth of a percentage point.
For all these positives though, there is also the looming worry about competition from Reliance Jio. While there is no clarity or consensus on when Reliance Jio’s services will be launched, when concrete plans by the company are revealed, investors may be forced to tone down some of their expectations on tariffs and volume.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
