The news of Adani Group participating in the 5G spectrum auction has worried telecom investors. The group, which had recently ventured into the cement sector, said in a press release on July 9 that if the spectrum is won in the auction, it would be used for private players with enhanced cyber security at airports and seaports and logistics, power generation. To provide network solutions. and manufacturing operations.
However, the clarification that the group does not intend to enter the consumer mobility sector has done little to quell investors’ fears. Shares of Bharti Airtel Ltd fell nearly 5 per cent on the NSE on Monday.
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“It is too early to assess the impact on incumbents, but a lot will depend on the spectrum bands and volumes for which the Adani group bids,” said an analyst at a domestic brokerage house on the condition of anonymity. Preparing the groundwork for entering the consumer mobility business. “Until there is more clarity on the exact business plan of the group, this development will be an overhang for the existing telcos,” the analyst said.
The concern about the competitive intensity of the market stems from the entry of Reliance Industries Limited (RIL) into the telecom sector. As the chart shows, Jio’s entry into the telecom sector affected operators with weak balance sheets more in terms of revenue market share.
Analysts at Jefferies India Pvt Ltd said, “(Telecom) shares declined in late 2015, a year before the launch of Jio. may not allow, but circumstances may change, as in the case of RIL.
For now, as Adani restricts its entry into the enterprise business, spectrum allocation in the 5G auction will mean more competition for Reliance Jio and Bharti Airtel in the business-to-business side of this segment, said Piyush Pandey, Principal Analyst, Institutional Equities, Yes Securities Limited
“Since Adani has not formally announced entry into the mobile business, it is too early to worry about the growth of the mobile business of Airtel or Jio. We have not changed our stock outlook or earnings estimates for Bharti Airtel yet,” Pandey said.
There is also speculation that Adani may acquire Vodafone Idea Limited (VIL). In response, VIL shares rose 3.5% on the NSE on Monday. That said, buying VIL would require a lot of money. It may require more than this to obtain the VIL in its current form and shape. 250,000 crore in capital infusion as per estimates by Motilal Oswal Financial Services.
Fears of increasing competitive intensity will bother telecom investors.