Bharti Airtel slumps on fears of increased competition

Bharti Airtel declined 3.62% to Rs 931 at 11:25 IST on BSE after rival company Reliance Communications was allocated Global System for Mobile communications spectrum in remaining 14 circles in India.

The stock hit a high of Rs 970 and a low of Rs 927.50 so far during the day. It touched a 52 week high of Rs 1,149 on 10 October 2007 and a 52 week low of Rs 612 on 11 January 2007.

Shares of India’s top cellular services provider in terms of market share underperformed the market over the past one month till 11 January 2008 declining 2.23% compared to the Sensex’s rise of 3.60%. It also underperformed the market over the past one quarter, declining 9.68% compared to Sensex’s gain of 13.08%.

The company’s current equity share capital is Rs 1,897.84 crore. Face value per share is Rs 10.

The current market price of Rs 931 discounts its Q2 September 2007 annualised EPS of Rs 34.13, by a PE multiple of 27.27.

Reliance Communications (RCom) can now operate its Global System for Mobile communications (GSM) service in remaining 14 circles to join the league of 'National Footprint' with Bharti Airtel. RCoM is already operating GSM services in 8 circles of India. Meanwhile market leader in GSM segment Bharti Airtel presently operates in India's 22 circles and was granted additional spectrum in two circles on Friday, 11 January 2008.

Bharti Airtel's principal activity is to provide mobile telecommunication services in India. It also provides fixed-line, VSAT, Internet and broadband services.

The company’s net profit rose 82.3% to Rs 1619.15 crore on 44.9% rise in sales to Rs 6059.89 crore in Q2 September 2007 over Q2 September 2006.

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Bharti Airtel connects gains on plan to boost rural reach
Bharti Airtel rose 4.09% to Rs 846.55 at 14:41 IST on reports it plans to double its number of telephone towers in a bid to increase its rural reach.

HCL Technologies hardens on plan to buy out US unit
HCL Technologies was up 1.52% to Rs 294.05 at 15:18 IST after it said it would acquire the balance 49% stake in HCL EAI Services Inc.

Tariff reduction spells gain for telecom shares

Telecom pivotals of the Sensex and Nifty were up between 0.7 - 2%, after the latest order of the telecom regulator slashing tariffs for users.

VSNL rose 2% to Rs 386.50, Reliance Communications gained 1.3% to Rs 405.50, Bharti Airtel gained 1.1% to Rs 747 and MTNL gained 0.7% to Rs 146.25, boosted by news of the Telecom Regulatory Authority of India (TRAI) cutting access deficit charges.

Reliance Communications (RCL) had bounced back in the past two days after the company announced on Monday (19 March) that it had got the court's nod for demerger of its two business in favour of a separate company. It had risen to Rs 400.30 from Rs 376.90 on 16 March 2007. Earlier, the RCL stock had tumbled on concerns of increased competition from Vodafone after the British mobile services provider, on 15 March, reached a partnership agreement with Essar. From Rs 398.55 on 14 March 2007, RCL retreated to Rs 376.90 by 16 March 2007.

VSNL had recovered from the lower level after a setback in early February - early March 2007. From Rs 355.25 on 5 March 2007, VSNL's scrip had firmed up to Rs 377.70 by 20 March 2007.

The total amount of access deficit charge (ADC), the fee paid by all telecoms users to fund loss-making rural network expansion by state-run Bharat Sanchar Nigam (BSNL), has been reduced to approximately Rs 2000 crore from the existing level of Rs 3200 crore for the financial year 2007/08, TRAI informed.

Apart from the cut in the annual charge firms pay, the regulator also abolished the ADC on all outgoing international calls from a previous 80 paise per minute. The charge on incoming calls from overseas was cut by 38%. The new fee structure will be applicable from 1 April 2007.

Market men are also awaiting announcement regarding annual licence fees and spectrum charges for wireless telephony. In the Union Budget 2007-08, the finance minister proposed setting up a committee to consider reduction in annual licence fees and spectrum charges for wireless telephony, in order to align them with international rates. At the moment, wireless companies pay 6-10% of net revenues as license fee and 2-6% as spectrum charges based on the circle and the spectrum used.

The Department of Telecom (DoT) favours a 6% annual license fee compared to the existing 6 - 10%, and is likely to recommend a cut. But the final call on this will be taken by the finance ministry.

Profit-booking sets in after a firm start

The BSE Sensex slipped from a high, as profit-booking began immediately after a strong opening. At 10:18 IST the BSE Sensex was up 61.58 points, to 14,417.52. It had opened higher, at 14,436.18, and surged to a high of 14,465.38 as buying continued. From this point, it started falling, and touched a low of 14,385.78

The total turnover on BSE amounted to Rs 561 crore.The market-breadth was strong on BSE, with 1,338 shares advancing compared to 459 that declined.Among the 30-Sensex pack, 22 advanced while the rest declined.Telecom services provider, Bharti Airtel, was the top gainer, up 1.86% to Rs 806.50, on a volume of 51,264 shares.

ABB gains on quarterly outcome
ABB rose 2.7% to Rs 3905, after the company announced 42.6% growth in net profit in the December 2006 quarter along with a 5-for-1 stock-split.A strong 7,775 shares changed hands in the counter on BSE.

The stock had surged in early-February 2007. It had later pared gains in a weak market before firming up again on the eve of the results. The stock had risen nearly 2% on Thursday (15 February 2007) to Rs 3800.95. The results were announced on Friday (16 February 2007), the day when the market was closed for a public holiday.

ABB has reported 42.6% growth in net profit in the December 2006 quarter to Rs 134.95 crore from Rs 94.61 crore in the December 2005 quarter. Income from operations has surged 44.6% to Rs 1426.31 crore (Rs 985.72 crore).

ABB India had a record order intake during the year (year ended 31 December 2006), up 50%, at Rs 5,623.60 crore compared to Rs 3,764.50 crore last year. The record growth in order intake has helped ABB India to increase its order backlog to Rs 3,372.30 crore, nearly 60% more than the order backlog of Rs 2,103.20 crore at the beginning of the year.

ABB India plans to invest Rs 250 crore over the next two years to set up new factories, augment its existing capacities and foray into new areas. The company will set up factories in Delhi, Baroda, Nasik, Mumbai and parts of Karnataka.

The $100 million (nearly Rs 450 crore) investment in India that ABB announced in 2004 will be completed by the end of the first quarter of this year (March 2007), or early second quarter.

Reliance Mutual Fund's stake buy spawns interest in Avaya GlobalConnect
Avaya GlobalConnect, a communication solutions provider, rose 3.6% to Rs 278.40, extending Thursday's rise.As many as 36,642 shares changed hands in the counter on BSE.

Avaya GlobalConnect said on Thursday (15 February 2007), a growth fund of Reliance mutual fund bought a further 3.51% stake in the company, taking the fund's total holding to 6.13%. The stock had risen 3.7% that day, boosted by the announcement, to Rs 268.50. The stock is up 32.1% from a recent low of Rs 210.65 on 10 January 2007.

In January 2007 , Avaya Global Connect reported robust Q3 December 2006 results. The consolidated net profit in Q3 December 2006 jumped 237% to Rs 8.43 crore (Rs 2.50 crore). Net sales for the same quarter rose 31% to Rs 153.96 crore. For April - December 2006, the consolidated net profit declined 32% to Rs 17.22 crore (Rs 25.46 crore), while sales rose 24% to Rs 437.82 crore.

Avaya GlobalConnect, recently, launched its unified communication solutions that will facilitate communication across multiple devices and interfaces such as personal computers (PCs), mobile phones as well as landlines. Avaya will integrate its solutions with existing networks and applications through partnerships with multiple vendors such as Microsoft, IBM, Nokia and Polycom.

FII-holding in the scrip, as at end-December 2006, was 4.37%, lower than the holding of 7.98% at end-September 2006.The current price of Rs 278.40 discounts its FY 2006 EPS of Rs 17.20, by a PE multiple of 16.1.

Telecom pivotals sustain interest; Bharti Airtel climaxes
Cellular service providers extended gains, pinning hopes on sectoral re-rating following Vodafone's deal for Hutchison-Essar.

Bharti Airtel was up nearly 2% to Rs 807.25. The stock hit a lifetime high of Rs 810.90. Reliance Communications was up 0.7% to Rs 470. As many as 2.9 lakh shares changed hands in Reliance Communications, while 77,004 shares got traded in Bharti Airtel.

Telecom shares had surged from late-January 2007 to early-February 2007 on expectations of aggressive bidding for Hutch-Essar. The expectations came true, when Vodafone, on 11 February 2007, emerged as a top-bidder for Hutchison's 67% stake in the fourth largest cellular services, at an enterprise value of a stunning $18.8 billion.

From Rs 686.90 on 24 January 2007, Bharti Airtel had surged to Rs 781.25 by 5 February 2007. It had slipped to Rs 728.80 on 12 February 2007 before bouncing back once again.

Reliance Communications (RCL) had surged to Rs 515.10 on 5 February 2007 from Rs 434.95 on 24 January 2007. From this high, the stock had declined to Rs 441.05 by 13 February 2007, partly due to concerns of equity dilution arising from the large $1 billion FCCB issue. The RCL scrip, however, recovered later.

Subscriptions for mobile services are growing at a fast clip in India. The country recorded 6.5 million net new subscribers in January 2007, making it the fastest growing major mobile phone market in the world.

Both Bharti and RCL reported robust Q3 December 2006 results. Bharti Airtel’s consolidated net profit, as per US GAAP, jumped 122.8% to Rs 1215.13 crore (Rs 545.30 crore), beating market expectations. Consolidated revenue for the same quarter rose 62.3% to Rs 4913 crore (Rs 3025.60 crore).

RCL’s consolidated net profit jumped 198 % in the December 2006 quarter to Rs 924.42 crore, on 26% growth in consolidated revenue to Rs 3755.30 crore.

The response to an IPO of the sixth largest cellular operator, Idea cellular, was strong. The IPO was subscribed nearly 50 times, with aggressive bidding by FIIs.

On 2 February 2007, Telecom Regulatory Authority of India (TRAI) decided to lower port charges by up to 29%, allowing cellular operators to connect to BSNL and MTNL lines, a move which is expected to result in tariff cuts.