Adani’s 5G spectrum auction entry worries telecom investors

However, the clarification that the group does not intend to enter the consumer mobility space has done little to assuage the fears of investors (Photo: Reuters) — However, the clarification that the group does not intend to enter the consumer mobility space has done little to assuage the fears of investors **(Photo: Reuters)**

2 min read . Updated: 11 Jul 2022, 11:39 PM IST Harsha Jethmalani

The Street’s concerns over competitive intensity stems from the entry of RIL in the telecom sector in 2015

The news that the Adani Group, will participate in the 5G spectrum auction, has worried telecom investors. The group, which recently ventured into the cement sector, said in a press release on 9 July that if spectrum is won in the auction it will be used to provide private network solutions along with enhanced cyber security at airports and ports and logistics, power generation and manufacturing operations.

However, this clarification that the group does not intend to enter the consumer mobility space has done little to assuage the fears of investors. On Monday, the stock of Bharti Airtel Ltd declined around 5% on the NSE.

“It is too early to gauge the impact on the incumbents, but a lot will depend on the spectrum bands and quantum for which the Adani Group bids," said an analyst with a domestic brokerage house requesting anonymity. There are also murmurs that the group is laying a base for entering the consumer mobility business. “Unless more clarity emerges on the group’s exact business plan, this development will remain an overhang for existing telecom companies," the analyst said.

The Street’s concerns over competitive intensity stems from the entry of Reliance Industries Ltd (RIL) in the telecom sector. As the chart shows, Jio's entry into the telecom sector impacted operators with weak balance sheets more, in terms of revenue market share.

“(Telecom) stocks derated towards late 2015, a year before Jio's launch," said analysts at Jefferies India Pvt. Ltd. Jefferies said that while a captive non-public networks licence may not allow the Adani Group to launch commercial service now, the conditions could change, just like in the case of RIL.

For now, as Adani has restricted its entry into the enterprise business, spectrum allocation in the 5G auction will mean more competition for Reliance Jio and Bharti Airtel on the business-to-business side of this segment, said Piyush Pandey, lead analyst, institutional equities , Yes Securities Ltd.

“As Adani has not formally announced its entry into mobile business, it is too soon to worry about Airtel’s or Jio’s mobile business growth. We have not changed our stock outlook or earnings estimates for Bharti Airtel as yet," Pandey said.

Speculation is also rife that Adani may acquire Vodafone Idea Ltd (VIL). In response, the VIL stock rose 3.5% on the NSE on Monday. That said, buying VIL would require plenty of fund infusion. Acquiring VIL in the current form and shape may require more than ₹250,000 crore in capital investment, according to Motilal Oswal Financial Services’ estimates.