In anticipation of the expected reforms to be announced by the new government in the Indian telecom sector, listed telecom companies including Reliance Communications, Bharti Airtel, Idea Cellular and Tata Teleservices recorded a bullish rally in recent market trade and escalation in market capitalisation.
At the end of May 21, 2009 trading session, the Sensex jumped by nearly 68 per cent to 13736.54 points from its lowest point during the current calendar year (March 9, 2009). The telecom companies’ market capitalisation is in anticipation of telecom reforms to be announced by the new government.
Reliance Communication (RCOM) is leading the telecom pack with nearly 144 per cent growth in market cap since March 9. Idea Cellular and Bharti Airtel’s market cap has jumped by 54 per cent and 45 per cent respectively. MTNL’s market cap is also up by nearly 55 per cent since March 9 rally.
The Sensex closed at its lowest point during the current calendar year on March 9, 2009 at 8160.40 points. During the ensuing trading sessions the Sensex recorded 49 per cent growth to touch 12134.75 points on May 4, 2009. In the same trading session on May 4, the market capitalisation of listed Indian telecom companies grew up to 73 per cent in anticipation of a future stable government led by NDA or UPA.
Reliance Communication led the bull run with 73 per cent followed by Idea 39 per cent and Bharti Airtel 29 per cent growth in market capitalisation.
Some of the key policy priorities on the agenda of the new government for the telecom sector includes allocation of frequency for telecom service providers and new rules for subscribers to switch operators using the same tel ephone numbers.
The new government is also expected to take the real first step towards listing the state-run Bharat Sanchar Nigam (BSNL). Once the listing happens, it will be the largest yet on the Indian bourses given the size of BSNL and the regulatory requirement of a minimum 10 per cent floating stock for listing companies on stock exchanges.
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Though the Congress party manifesto rejects “blind privatisation followed by the BJP-led NDA government, it believes that the Indian people have every right to own part of the shares of public sector companies while the government retains majority shareholding”.
The Congress party’s manifesto also lays great emphasis on “to connect every village to a broadband network within three years. This will help locate new, non-agricultural jobs in villages and open vast new opportunities for our rural youth”.
The telecom industry expects some rationalisation of the revenue-sharing regime. It is felt that the present requirement of sharing 25-30 per cent of the revenues with the government is steep, as the tariff for telecom services in India is among the lowest in the world. While revenues per user (ARPUs) have declined, the cost of operating the service has increased manifold. The telecom operators are expecting the new government to recasts the current revenue-sharing regime.
Also on the wish list is rationalization of spectrum charges and license fee which are currently the highest in the world.
The telecom operators are also expecting a quick decision on the 3G spectrum allocation issue. The 3G service will not only allow faster communications but also a wide range of applications such as high-speed net access, video calls, fast music and video downloads, interactive gaming and global positioning over Internet.