7 Oct 2009, ET Bureau
MUMBAI: The mobile phone sector, long the darling of the markets, saw itself facing the uncomfortable prospect of investors hanging up on it on tuesday on fears that a renewed tariff war may bring its dream run of profit growth to an end and could force smaller players to sell out or shut shop.
Shares in mobile firms were pummelled for the second straight day, leaving analysts wondering if the sector was seeing a fundamental re-rating as investors increasingly worry about the impact of the bruising price war on its profit and revenue outlook.
Bharti Airtel, the country's largest wireless service provider, slumped 10% to close at Rs 359.40, taking losses in just two trading sessions to 17%, the steepest two-day fall in almost a year. Reliance Communications tumbled 11% and Idea, the country's fourth-largest mobile operator, fell 8%.
Mobile tariffs in India are already the lowest in the world thanks to fierce competition, but the intensity of the bloodletting looks set to increase as operators come up with price plans to rival those unveiled by Reliance Communications (RCOM). The Anil Ambani-controlled firm on Monday announced the slashing of tariffs across the board for local, roaming and long-distance calls to 50 paise per minute.
Apart from the RCOM tariff cut, suggestions from the Telecom Regulatory Authority of India on Monday that companies shift to charging customers for usage in seconds instead of minutes now, has compounded the woes for a sector that was not so long ago viewed as the safest of safe havens for investors.
But with the bottom slipping under telecom stocks, the regulator appeared to dilute his earlier position, saying the proposal on per-second billing was at an initial stage and too much was being read into the issue.
TRAI chairman JS Sarma also said that mobile operators were free to oppose the scheme and the regulator would consider their opinion during the consultation process.
The chief of Bharti Airtel said tariffs were best left to market forces. "We had a system for forbearance for years now. The regulators and the government should let it remain like that and let market forces decide. Everyday, you have some other operator or announcing some new plans, so we are at it to provide the best for our customers," Bharti chairman Sunil Mittal told ET NOW.
"The telecom sector in India has done very well and therefore, if you ask me, I strongly think the regulator should continue with the existing policy and not interfere."
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