Spectrum Auction: Cut-throat Bidding Leaves Telecom Scrips Bleeding

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Telecom companies raised their bids for airwaves to Rs 94,000 crore on Monday, closing in on 2010’s record Rs 106,000 crore from spectrum sales, but investors and analysts expressed concerns about their future cash flow and profitability.”The

“The marksituation being what it is, in the short to medium term, profitability and cash flows will take a hit. And margins will also go down unless call rates are revised,” said Hemant Joshi, partner at Deloitte Haskins & Sells.

Aggressive bidding by telecom companies, as they strive to protect existing airwaves in the 900 Mhz band, has seen licence renewal costs surge by more than 75% over the minimum price, according to brokerage CLSA. Reliance Communications, India’s fourth-largest carrier, and No. 3 Idea Cellular – both of which have airwaves up for renewal in seven and nine circles, respectively – have underperformed the broader markets since the sale began on March 4, dropping 5.1% and 2.7%, respectively, at Monday’s close. Shares of the Anil Ambani-run RCom slumped to a 52-week low ofRs 62.45. Market leader Bharti Airtel, which has the least at risk in the sale among the top four telcos since it has alternative bandwidth in most of its six renewal circles, has slipped 1.5%. To be sure, the benchmark Sensex has dropped 2.5% in the same period.  Original post at ET Telecom

Wahengbam Rorrkychand

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