Idea, Telenor hit; Bharti, Voda benefit

NEW DELHI: The Supreme Court order cancelling 121 licenses has thrown up unintended winners and losers in the telecom sector.
Analysts say Idea and Telenor have been impacted by the judgement. Idea has not been accused of any wrongdoing but the company has been hit in as many as nine circles, which could pose a financial burden for the Aditya Birla Group. Telenor, one of the largest global companies with a formidable reputation, on the other hand, is in trouble only because it bought licenses from Unitech without proper due diligence.The same could be the case for Etisalat.
The combined subscriber base of the five new entrants is less than 5% even after nearly four years of getting licences. Employees of these companies would also be nervous and may face uncertainty. The numbers run into thousands, and unless the situation improves , the job market in the telecom sector could face an over-supply of talent.
The biggest gainer of Thursday’s announcement is probably Bharti, with fairly exuberant upward pressure on the stock. Following them is Vodafone, who has also stayed clear of the controversy though only just. Vodafone did get spectrum starting January 10, 2008, but fortunately for the company, it received LoIs (letter of intents) in 2006 and therefore is not clubbed with current cancellations.
Reliance and Tatas have also managed to escape the brunt of the SC verdict since the dual technology issue was not in front of the court.
However,the SC is hearing a matter on dual technology and therefore their fate will finally be determined after that order is announced. In the meantime, the Supreme Court has given directions to the CBI vide their order dated December 16, 2010 to file FIRs in the dual technology matter, although that may not cover all the operators.
Bharti, Vodafone, and Idea (in 11 circles) as well as Tatas and Reliance could gain not only from the roughly 90 million subscribers (10% of the existing market ) that are expected to move from the cancelled licences to new entrants using MNP (mobile number portability) but in fact, may also gain precious new 2G spectrum.
Zero sum game
Gainers |
Bharti, Vodafone, Idea (11 circles), Reliance, Tatas
Losers |
Uninor, S Tel, Loop, Etisalat, Videocon/Datacom, Sistema/MTS
Unaffected |
BSNL, MTNL