While Bharti Airtel fell 9% to Rs302, Idea Cellular fell 9.1% to Rs85 and Reliance Communications fell 6.5% to Rs50.40
Mumbai: Bharti Airtel Ltd, Idea Cellular Ltd and Reliance Communications Ltd lost a combined ₹ 13,165.55 crore in market value on Thursday after Reliance Industries Ltd (RIL) chairman Mukesh Ambani announced aggressively low prices for RIL’s Jio mobile phone services.
Bharti Airtel lost ₹ 8,454.49 crore in market value on Thursday, Idea Cellular lost ₹ 3,528.79 crore and Reliance Communications lost ₹ 1,182.27 crore as Ambani made the announcement at RIL’s 42nd annual general meeting.
Ambani said Reliance Jio Infocomm Ltd (R-Jio) will sell its 4G Internet data for as low as ₹ 50 per gigabyte (GB), prompting analysts to predict a price war.
In intraday trading, Bharti Airtel fell as much as 9%, its steepest fall since 15 February 2010, to ₹ 302, a level last seen on 5 February. Idea Cellular fell as much as 11% to ₹ 83.20, a level last seen on 30 October 2012. Reliance Communications Ltd fell 10.11% to ₹ 48.45.
Ambani also said that from 5 September, Jio’s bouquet of services will be available for free till 31 December.
“Other telcos will be forced to change their business model, revenue model and the network in use. This would mean capex spending, and they may have to capitalise further," said Deven Choksey, group managing director, KR Choksey Investment Managers Pvt. Ltd.
It could be an uphill task considering the already highly leveraged balance sheets of telecom companies, which will weigh on their ability to participate in the upcoming telecom spectrum auctions, India Ratings & Research Pvt. Ltd said in a note on Tuesday.
Idea reported a higher net debt/Ebitda (earnings before interest, depreciation and taxes) ratio in fiscal year 2016 at 3.25, its peak financial leverage in five years, the rating agency pointed out
Bharti Airtel’s financial leverage was 2.4 times, which is expected to go up in FY17 with the increase in capital expenditure and margin moderation due to intensifying competition in the data segment.
Reliance Communications, on the other hand is highly leveraged with net debt/Ebitda ratio of 5.6.
The ratings agency said it also expects key players to invest in profitable and bigger circles, rationalize spectrum in others and divest non-core assets to free up capital for investment into 4G Long Term Evolution (LTE) infrastructure that R-Jio has built.
Bharti Airtel fell 6.4% to close at ₹ 310.70, Idea Cellular ended at ₹ 83.70, down 10.5%, and Reliance Communications fell 8.81% to ₹ 49.15 on a day the benchmark Sensex edged down 0.1% to 28,423.48 points.
Mukesh Ambani Group companies closed lower. Reliance Industries fell 2.73% to close at ₹ 1,029.15, Reliance Industrial Infrastructure Ltd fell 2.3% to ₹ 434.70, Network18 Media & Investments Ltd fell 3.7% to ₹ 44.25 and TV18 Broadcast Ltd fell 1.2% to ₹ 41.70.