Reliance Industries, Bharti Airtel spectrum shopping carries share price up; Vodafone Idea stock falls

Share price of Bharti Airtel and Mukesh Ambani’s Reliance Industries surged on Wednesday, a day after the telecom companies revealed their telecom spectrum shopping list. Reliance Industries shares surged 1% to hit an intra-day high of Rs 2,133 per share, while Bharti Airtel was among the top gainers on Sensex, up 1.5% to hit a high of Rs 549.5 apiece. Both Bharti Airtel and Reliance Industries-owned Jio strengthened their network infrastructure, purchasing Rs 18,700 crore and Rs 57,000 crore worth of spectrum, respectively. Meanwhile the third private telco, Vodafone Idea was down nearly 2% after making a meagre spectrum purchase worth Rs 1,990 crore.

Airtel, Jio prepare for future; Vodafone’s weak liquidity evident

Bharti Airtel acquired 355.45 MHz of spectrum in 19 out of 22 circles, while Jio acquired 488.35 MHz of spectrum across all 22 circles. On the other hand, Vodafone Idea acquired just 11.8 MHz of spectrum to cover minor gaps in five circles. “Bharti and Jio picked up a significant share of the spectrum on offer across key bands to cover up for the bandwidth expiring later this year, while also preparing to expand their coverage as well as capacity across the country. On the other hand, VIL increased its holding marginally on an already large spectrum portfolio,” said analysts at Kotak Securities in a note. 

Decoding the spectrum sales, Motilal Oswal said that Reliance Jio and Bharti Airtel’s purchase could be owing to the renewal of existing spectrum, investment in lower bands to deepen coverage, and investment in capacity bands to de-bottleneck networks and prepare for a seamless switch to 5G in the future. “VIL’s low participation is evident from its weak liquidity. Its huge debt leaves limited options,” they added. Vodafone Idea’s purchase was 76% lower than what it was required to shell out for renewal of spectrum.

Reliance introduces new JioPhone plans

Prior to the spectrum auction, Reliance Industries-owned Jio, announced its new 4G feature phone, offering plans with 12 and 24 months of recharge and monthly data allowance of 2GB, worth Rs1,499 and Rs1,999. “In our view, the offer is unlikely to see meaningful traction given 1.9x-2.6x increase in upfront cost,” analysts at Credit Suisse said. Those Goldman Sachs too hold a similar view.

Upfront cost in the new plans unveiled by Jio would limit any change in the segment. Credit Suisse said that upfront cost plays an important role, given the affordability constraints. “Overall, we believe that the new offer is unlikely to have a material impact on Airtel and Vodafone Idea. If at all, Vodafone Idea would be more prone to subscriber loss given the higher share of low-end feature phone subscribers. 

Brokerages bullish on Bharti Airtel, Reliance Industries

In a note prior to the Spectrum auction, Goldman Sachs maintained its ‘Buy’ rating on Bharti Airtel and Reliance Industries while advising investors to sell Vodafone Idea. The brokerage firm has a target price of Rs 675 per share for Bharti Airtel and Rs 2,390 apiece for Reliance Industries. Vodafone Idea’s target price is down at Rs 3.2 per share.

Credit Suisse has an ‘Outperform’ rating on Bharti Airtel with a target price of Rs 775 per share, however, on Reliance Industries it is now Neutral with a target price of Rs 1,930 apiece. Vodafone Idea has an ‘Underperform’ rating pinned on it with a target price of Rs 7.5 per share.

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