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Business News/ Market / Mark-to-market/  What’s new in the telecom industry
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What’s new in the telecom industry

There is still some uncertainty related to Reliance Jio's launch in December along with the Telecom Commission's views on spectrum sharing and trading

Given the lack of details, one analyst says, it’s best to wait until December to gauge the impact of Reliance’s entry. Photo: MintPremium
Given the lack of details, one analyst says, it’s best to wait until December to gauge the impact of Reliance’s entry. Photo: Mint

Last week turned out to be busy on the news front for the telecom industry. Reliance Industries Ltd (RIL) finally announced that its subsidiary Reliance Jio Infocomm Ltd will start telecom services in December. The Telecom Commission, too, after a long delay, has finalized its views on spectrum sharing and trading. In both cases, concrete details are still awaited, and hence, as far as telecom stocks go, the uncertainty related to these events remains.

Jio’s December launch will be about six months later compared with some estimates, although the delay alone is hardly any reason for excitement for investors in incumbent companies. After all, there has already been a considerable delay and a few more months won’t make much of a difference.

RIL also said at its annual shareholders’ meeting that the entire bouquet of Jio’s services will be priced between 300 and 500. But it’s far from clear what the bouquet of services will include. This level of pricing can be disruptive, for instance, if it includes voice services. But analysts point out that RIL’s announcements were silent about its voice plans. Note here that voice over 4G LTE (long-term evolution) hasn’t gained traction anywhere in the world.

Given the lack of details, one analyst says, it’s best to wait until December to gauge the impact of Reliance’s entry. But analysts at Bank of America-Merrill Lynch said in a note to clients, “We consider a dual-SIM smartphone to be key mobile offering by Jio. Given the lack of traditional voice offering by Jio, we believe that a potential dual- SIM smartphone could be attractive to consumers as they could continue to use their existing telco SIM to make voice calls and use Jio’s SIM for access to cheaper high-speed data offerings."

This can have an impact on data tariffs. As it is, investors were disappointed by the drop in average price realizations in the voice business last quarter, after which it became clear that tariff increases can’t be taken for granted. Shares of Idea Cellular Ltd have dropped by more than 15% since it announced March quarter results in end-April.

In large part, this was also to correct for the irrational exuberance around large spectrum purchases by incumbents in March. Investors had then concluded that these companies will more than make up for the large investments by gradually raising tariffs.

As far as the expected norms on spectrum sharing and trading go, it’s still not clear whether the Telecom Commission has accepted all the recommendations of the Telecom Regulatory Authority of India. While it may be safe to say that any clearance on this front from the government will be a positive, investors are unlikely to get excited unless concrete details are available.

It’s little wonder investors shrugged off this bit of news in late last week’s trading sessions.

The writer does not own shares in the above-mentioned companies.

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Published: 14 Jun 2015, 05:56 PM IST
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