The announcement that the Adani Group will participate in the 5G spectrum auction has alarmed telecom investors. The company, which just entered the cement industry, stated in a news statement on July 9 that if the spectrum is obtained in the auction, it will be used to deliver private network solutions as well as increase cyber security at airports and ports, as well as logistics, power generation, and manufacturing activities.
However, the group’s explanation that it does not seek to enter the consumer mobility industry has done nothing to relieve investors’ concerns. Bharti Airtel Ltd.’s stock on the NSE fell by about 5% on Monday.
Although it is still too soon to predict how this will affect the incumbents, a lot will rely on the spectrum bands and quantum that the Adani Group offers, “according to an analyst with a domestic brokerage firm who asked to remain anonymous. Rumors also abound that the group is establishing a foundation for a consumer mobility firm. “Unless more information about the group’s specific business model becomes known, this development will continue to be a source of anxiety for present telecom carriers,” the analyst noted.
The Street is concerned about the level of competition because Reliance Industries Ltd. (RIL) has entered the telecom industry.
“(Telecom) stocks derated towards late 2015, a year before Jio’s launch,” noted Jefferies India Pvt. Ltd. analysts. While a captive non-public networks license may prevent the Adani Group from launching commercial services, for the time being, Jefferies believes that conditions may alter, as they did with RIL.
For now, because Adani has limited its foray into the enterprise market, spectrum allotment in the 5G auction would increase competition for Reliance Jio and Bharti Airtel on the business-to-business side of this segment, according to Piyush Pandey, lead analyst, institutional equities, Yes Securities Ltd.
“As Adani has not officially proclaimed its entry into the mobile industry, it is premature to be concerned about the growth of Airtel or Jio’s mobile companies, We have not revised our stock forecast or earnings expectations for Bharti Airtel,” Pandey added.
There are also a lot of talks that Adani would buy Vodafone Idea Ltd. (VIL). As a result, the VIL stock increased 3.5 percent on Monday on the NSE. However, purchasing VIL would require a substantial influx of cash. According to estimates from Motilal Oswal Financial Services, purchasing VIL in its existing form and structure may entail a capital investment of more than 250,000 crores.
Investors in the telecom industry will remain uneasy due to concerns about escalating competition.
Follow and connect with us on Facebook, LinkedIn & Twitter
