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Airtel, Idea Stocks Rise Amid Market Gloom, But Spectrum Costs Weigh Heavy

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Bharti Airtel and Idea Cellular stocks have gained 11% and 15%, respectively since the beginning of the latest round of the spectrum auction on March 4. This was despite the overall weakness in the broader market as reflected in the 3% drop in the S&P BSE Sensex during the period. These stocks may, however, find it difficult to retain gains given the high intensity of bidding as there will be an increase in the amount the telcos need to pay immediately to the government once the auction is over.

The stocks had fallen during the six weeks previous to the auction due to concerns that aggressive bidding may impact balance sheets. One reason for their recovery is that telcos have been able to retain airwaves in key circles where they were up for renewal, thereby ensuring business continuity.

In addition, the technological liberalisation of the spectrum, which allows telcos freedom to select the service platform will help incumbents to rationalise spectrum costs. For instance, 5 MHz contiguous channels in the 900 MHz band currently deployed for 2G can also be used to deliver 3G services. Similarly, contiguous CDMA channels can be used to deploy 4G services. Original post at ET Telecom

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Wahengbam Rorrkychand

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