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With the conclusion of the auction of spectrum in the GSM bandwidth in which the majority of the Indian telecom operators provide their services, the much-needed clarity seems to be emerging for the beleaguered sector. Accordingly, telecom stocks are seen rising next week. We believe any re-pricing of 2G spectrum will be positive for the industry, which is already suffering from the stretched balance sheets, limited flexibility and low payoffs from 3G/4G investments.
The GSM spectrum auction, which concluded on Wednesday, saw total bids worth 94.08 bln rupees. The government, is targeting to raise 400 bln rupees from spectrum sale in 2012-13 (Apr-Mar) and the low mop-up will make its task harder to meet the aim. Telecom companies had bid for 18 out of the 22 telecom circles, leaving Delhi, Mumbai, Rajasthan and Karnataka circle with no buyers. Stocks are expected to react positively to any decision by the government to lower the reserve price for the remaining four circles.
