Telecom shares under pressure; Idea, Bharti Airtel down over 3%

Shares of telecommunications services providers were under pressure falling by up to 6% on the bourses after Bharti Airtel announced an effective reduction in pre-paid data tariffs by increasing data benefits on some of its pre-paid data recharge packs.

Bharti Airtel has dipped 4% to Rs 363 on the BSE. Idea Cellular slipped 6% to Rs 104, followed by Reliance Communications down by 4% at Rs 50 at 03:08 PM.

The move is to both protect their turf against competition from Reliance Jio Infocomm and also increase data consumption.

According to Business Standard reports Jio has announced it would launch commercial fourth-generation technology (4G) services in six to eight weeks. Analysts have said data rates are expected to fall 15-20 per cent with the entry of Jio.

Analysts at Edelweiss Securities expect competition, especially in the data space, to further intensify with launch of Reliance Jio. Heightened competitive intensity will lead to higher subscriber acquisition and retention costs, in turn impacting margins.

“We remain negative on the telecom sector due to sustained competitive intensity, higher capex and possibility of increasing leverage because of the upcoming spectrum auctions. We believe, waning of competitive environment is pivotal for the sector’s profitable growth. Also, we believe churn is a good proxy for mapping competitive intensity and will wait for it to stabilize before turning positive on the sector,” the brokerage firm said Q1 results preview.