Airtel falls 5% as Adani Group mulls 5G spectrum bid; Voda Idea jumps 6%

The reaction comes even as Adani Group said it does not intend to be in the consumer mobility space

Shares of Adani Enterprises (AEL) gained 2 per cent to hit an intra-day high of Rs 2,338.45 on the BSE on Monday after news reports suggested that the Adani Group is planning to participate in the 5G auctions. The stock was trading close to its record high level of Rs 2,420, touched on April 27, 2022.

However, following the report, shares of Vodafone Idea gained 6 per cent to Rs 8.95 on the BSE in the intra-day trade, while the state-owned company Mahanagar Telephone Nigam Limited surged 13 per cent to Rs 22.15, and GTL and Indus Towers jumped 8 per cent (Rs 9.37) and 4 per cent (Rs 217.85), respectively.

However, the sector giant Bharti Airtel dipped 5 per cent to Rs 661.25. In comparison, the S&P BSE Sensex was down 0.44 per cent at 54,244 points at 10:11 AM.

Meanwhile, Adani Group has said that it does not intend to be in the consumer mobility space. As India prepares to roll out next generation 5G services through this auction, we are one of the many applicants participating in the open bidding process, the Adani Group said.

"We are participating in the 5G spectrum auction to provide private network solutions along with enhanced cyber security in the airport, ports & logistics, power generation, transmission, distribution, and various manufacturing operations," Adani Group said in a media statement. CLICK HERE FOR FULL STATEMENT

AEL is the incubation arm of Adani Portfolio. AEL is leading decarbonization of industries and mobility through Adani New Industries Limited. Other next-generation of AEL’s strategic business investments are centered around airport management, roads, data center and water infrastructure which has significant scope for value unlocking.

According to Motilal Oswal Financial Services, even if the Adani Group plans to foray into the Mobility space, 5G spectrum (3,500Mhz, 26Ghz) alone may be unviable to offer its consumer's network coverage. A pure 5G investment does not validate a full-fledged Telecom foray.

"Other possibilities include acquiring the passive networks of GTL and RCOM, and active network or spectrum pacts – an inter-company roaming (ICR) arrangement with IDEA, or a greenfield network layout. All of this could be a Herculean task, the brokerage firm said. Acquiring IDEA in the current form and shape too may require over Rs 2,500 billion in capital investment," the brokerage firm said.

Plagued by an intense competitive environment in the last two decades, the thought of a new entrant in the sector gives investors jitters for the next round of severe competition, which could derail the current structural benefits (ongoing pricing improvement and market share gains). With so many ifs and buts, clearly the answer to the Adani Group’s venture into the Telecom space is not a binary one. The narrative of pricing and market share gains for Bharti may continue, but it may see a near-term knee-jerk reaction from investors, the brokerage firm added.