Telecom stocks may react negatively to higher auction reserve prices

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Updated: Saturday, August 4, 2012, 9:51 [IST]
 
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 Telecom stocks may react negatively to higher auction price

Telecom stocks may have a subdued opening on Monday, as the higher 2G auction reserve price of Rs 14,000 crores may not go down well with the markets.

Bharti Airtel closed at Rs 296.45, while Idea Cellular closed at Rs 81.10 and Reliance Communications closed at Rs 55.85 on the BSE at the close of trading hours on Friday.

On Friday late evening, the government set a steep reserve price for the 2G auction of spectrum at Rs 14,000 crore for 5 megahertz across the country.

The Union Cabinet also approved the recommendation of EGoM for reserve price for 800 MHz band at 1.3 times that of 1800 MHz band. Existing slab rate system for Spectrum Usage Charges (SUC), as recommended by EGoM, as the preferred option has also been approved by the Cabinet.

Analysts opine that some of the companies may not even bid at such a high reserve price. Telecom operators are already passing through a difficult phase and some are saddled with losses, while others have huge debts on their books.

In a phase where there is cut throat competition and low margins, the higher spectrum reserve price may further spell doom for the industry.

GoodReturns.in

Story first published:  Saturday, August 4, 2012, 9:49 [IST]
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